Print Friendly, PDF & Email

What is the production linked incentive scheme for electronics manufacturers?

Topics Covered: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

What is the production linked incentive scheme for electronics manufacturers?

Why in News?

Global electronics giants such as Samsung, Pegatron, Flex, and Foxconn among others are in final stages of negotiations to benefit from the Ministry of Electronics and Information Technology’s (MeitY) production linked incentive (PLI) scheme for making mobile phones and certain other specified electronic components.

About the PLI scheme:

Notified on April 1 as a part of the National Policy on Electronics.

It proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain.

Key features of the scheme:

  1. The scheme shall extend an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years with financial year (FY) 2019-20 considered as the base year for calculation of incentives.
  2. The Scheme is open for applications for a period of 4 months initially which may be extended.
  3. The Scheme will be implemented through a Nodal Agency which shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by MeitY from time to time.

Eligibility:

According to the scheme, companies that make mobile phones which sell for Rs 15,000 or more will get an incentive of up to 6 per cent on incremental sales of all such mobile phones made in India.

In the same category, companies which are owned by Indian nationals and make such mobile phones, the incentive has been kept at Rs 200 crore for the next four years.

What kind of investments will be considered?

  1. All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme.
  2. These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.
  3. However, all investment done by companies on land and buildings for the project will not be considered for any incentives or determine eligibility of the scheme.

Why we need such scheme?

The domestic electronics hardware manufacturing sector faces lack of a level playing field vis-à-vis competing nations.

  • The sector suffers disability of around 8.5% to 11% on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development.
  • Therefore, to position India as a global hub for Electronics System Design and Manufacturing (ESDM), it is necessary to encourage and drive capabilities in the country for developing core components and create an enabling environment for the industry to compete globally.

InstaLinks:

Prelims Link:

  1. Key proposals under the National Policy on Electronics.
  2. Production linked incentive scheme- when was it announced?
  3. Incentives under the scheme is available to?
  4. What kind of investments will be considered?
  5. Duration of the scheme.
  6. Who will implement it?

Mains Link:

What is the production linked incentive scheme for electronics manufacturers? Discuss.

Sources: the Hindu.