Electronics and hardware manufacturers may have a reason to cheer. Almost a year after an IT taskforce submitted its recommendations to spur hardware and electronics manufacturing, a full policy prescription is in the works.
It touches areas such as creation of National Electronic Mission, a modified package for electronics manufacturing and creation of a committee to oversee India's semiconductor wafer fabrication prospects.
Outlining the progress made with regard to his 100-day agenda set out in January this year, the Communications and IT Minister, Mr Kapil Sibal, said that a modified Special Incentive Package Scheme (SIPS) for ‘electronics eco system' units has already been drafted and “approval process on the same has been initiated”.
The Minister, however, did not commit a timeframe for its launch or elaborate on the nature of incentives that will be handed out under the new scheme.
Sources within Communications and IT Ministry, said the modified SIPS will focus on incentives mainly for electronics and telecom equipment manufacturing (loosely termed electronics ecosystem); it will also cover newer product categories and, in a departure from the past, stipulate different threshold investment slabs for different product types.
It is not yet clear which product categories are being included in the modified SIPS.
The previous version of SIPS – which failed to produce the desired results despite attracting proposals worth Rs 2.29 lakh crore – was devised as an integrated scheme for semiconductor fabs and ecosystem units. It had stipulated only two blanket thresholds — Rs 2,500 crore for fab units and Rs 1,000 crore for all kinds of ecosystem units including liquid crystal displays, plasma display panels, storage devices; solar cells amongst others.
semiconductors
With regard to semiconductors, the Government now plans to set up an Empowered Committee which will examine measures to attract investments in wafer fabrication units. The Cabinet Note for setting up this Empowered committee has been finalised. “The committee will look at aspects like what level of support is required for fabs and what benefits can the Government offer,” the source said.
However, there is no clarity yet on the status of 26 proposals received under the previous SIPS from companies such as BHEL, Birla Surya, Sterlite Technologies, Tata BP Solar Power and Moser Baer. Asked if these companies will have to reapply under the modified SIPS, Mr Sibal said, “We are examining these issues.”
Industry watchers tracking the sector believe that the earlier scheme had suffered due to its timing (it coincided with global recession) and also due to factors like high threshold investment limits. A combination of these factors led to a situation where many of the applicants could not achieve financial closure for even the minimum investments levels – a pre-requisite for their projects to be considered for Government incentives for up to 20 per cent in the case of SEZ units and 25 per cent for non-SEZ units.
Speaking to Business Line last week, the HCL Infosystems Chairman and the head of the 2009 IT taskforce, Mr Ajai Chowdhry, had exuded confidence that recommendations on electronics manufacturing would be implemented in another 3-6 months.
“If a headway is made in 3-6 months, it would bring a complete revival of the hardware industry,” he had said.
Ms Poornima Shenoy, President of ISA, said that modified SIPS will boost electronics manufacturing here. “Clear demarcation between chip manufacturing and development of ecosystem units with focused incentive packages and practical threshold limits will send the right message to investors,” she said.
Demand for electronics
While the demand for electronics stood at $45 billion for FY09, domestic production stood at a mere $20 billion.
The taskforce report had cautioned that the demand-supply gap could widen in the next 10 years and touch $296 billion by FY20, if the production continued to grow at the current rate of 16 per cent. Making a strong pitch for accelerating the pace of growth, it had said that a growth rate of 31 per cent needs to be achieved between FY09-20, to push up the electronics production level to $400 billion by the end of the target period.