In a bid to make domestic electronics manufacturing more attractive, the Centre will soon dish out production-linked subsidies for companies that commit significant capital to make semiconductors, microprocessors and other such hi-tech products in the country.

According to a note formulated by the Department of Electronics and Information Technology (DeitY) for the Cabinet, electronic manufacturers will get a 10 per cent subsidy on the production turnover. This will be in addition to the subsidy the Centre has offered on upfront investments to set up such plants. Production subsidy is given by the government to firms based on the level of output.

This is a part of DeitY’s proposal to amend the Modified Special Incentive Package Scheme (M-SIPS), a programme approved in 2012 to boost electronic manufacturing in the country.

As per the Cabinet note, seen by BusinessLine , the proposed production subsidy will replace the existing provision of reimbursing manufacturers the amount they spend on Central taxes and duties for making hi-tech electronics products, including microprocessors.

According to senior government officials, the amendment is being made after receiving industry representations. “Many players have written to us that production-linked subsidy is a better way of incentivising local manufacturing than giving tax reimbursements. The Finance Ministry is also in favour of this method,” an official said.

India currently imports electronics goods worth $100 billion every year. By 2020, electronics goods import will cross $400 billion to surpass the fuel import bill, Ravi Shankar Prasad, Union Minister for Communications and Information Technology, had said in September last year

Under M-SIPS, the Centre intends to provide benefits of up to ₹10,000 crore to the electronics products and components industry.

The scheme provides subsidy for capital outlays with a limit of 20 per cent for investments in Special Economic Zones and 25 per cent in non-SEZs.

Under this scheme, the Centre has already received 47 applications for projects worth ₹16,602 crore as on January 10, DeitY said in the note.

Of these, 29 projects entailing investments worth ₹4,416 crore have been approved, while ₹2,127 crore investments have been recommended by the appraisal committee.

Prime Minister Narendra Modi is said to have directed the DeitY to ensure that the net import-export balance for the sector be brought down to zero by 2020 as part of the ‘Make in India’ plan.

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