Electronics Components Incentive Policy

Electronics Components Incentive Policy aims to boost domestic manufacturing, promote self-reliance, and strengthen India’s electronics supply chain through financial incentives and support.

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Context: The Ministry of Electronics and Information Technology (MeitY) has finalized an incentive policy for electronic components manufacturing with a total outlay of ₹22,919 crore over six years.

Key Features of the Electronics Components Incentive Policy Scheme

Targeted Electronic Components: The scheme will focus on encouraging the production of key components that are currently imported, including:
- Display modules, Sub-assembly camera modules, Printed circuit board assemblies (PCBAs), Lithium cell enclosures, Resistors, capacitors etc.
Employment Creation:
- Total Direct Jobs Target: 91,600 direct jobs over six years
Increasing local value addition:
- The Production-Linked Incentive (PLI) scheme for smartphone manufacturing has been successful in attracting major companies like Apple and Samsung.
- However, despite the rise in domestic assembly, local value addition remains at 15-20%, and the government aims to increase it to at least 30-40%.
Structure of Incentives: The scheme will offer three types of incentives:
- Operational Incentives – Based on net incremental sales, similar to the PLI model.
- Capital Expenditure (Capex) Incentives – Based on eligible capital investments.
- Hybrid Model – A combination of operational and capex incentives.
Eligibility Criteria:
- Both Greenfield and Brownfield investments are eligible.
- Foreign companies can participate by:
  - Transferring technology to an Indian company, OR
  - Forming a joint venture with a domestic firm.

Key Challenges faced in Electronic Components Manufacturing

Lack of Domestic Scale – India’s current capacity is only 10% of total electronics production.
High Investment-to-Turnover Ratio –
- In smartphone production, every ₹1 invested generates ₹20 in revenue.
- In electronic components, every ₹1 invested generates only ₹2-4.
Heavy Import Dependency –
- Electronics imports are India’s second-largest import category after oil.
- 75% of India’s electronics production relies on imported components.
The demand-supply gap in the electronic components sector is huge:
- Current domestic production (2022-23): $10.75 billion.
- Domestic consumption gap: $100 billion.
- Potential export demand: $140 billion.