India’s electronic component push receives twice the anticipated interest

New Delhi: India’s scheme offering incentives to create an electronics component supply chain has generated strong interest as the Centre received 249 applications, proposing investments totalling $13 billion ( ₹1.15 trillion), according to Union IT minister Ashwini Vaishnaw.

The total investments proposed by conglomerates and small enterprises is nearly double the $6.7 billion ( ₹59,350 crore) the ministry of electronics & IT (Meity) had expected, said Vaishnaw, without disclosing the names of the companies, citing that applications are under evaluation.

“Alongside investments, we have also received electronics production estimates of more than ₹10.34 trillion ($116 billion)—as against our target of ₹4.56 trillion ($51 billion). That is more than double of what we had targeted, and will help us achieve our target of a $500-billion domestic electronics ecosystem in India by FY31,” Vaishnaw said at a press briefing in New Delhi. He added that out of this proposed investment and production estimates, one single company’s application is to set up a project worth ₹22,000 crore ($2.5 billion), alone.

Manufacturing Boost

The Electronics Components Manufacturing Scheme (ECMS), announced on 28 March, offers incentives ranging up to 10% of production targets and 50% of capital expenditures for six years, including a one-year gestation period. In total, Meity will spend $2.7 billion ( ₹22,737 crore) for electronics components, which include display and camera modules, printed circuit boards (PCBs), lithium-based cells for batteries, enclosures from mobile phones, and finally, localizing specialized machines for manufacturing and assembling components.

The first deadline for applications ended 30 September, and companies such as electronics supply chain firm Zetwerk and contract manufacturer Optiemus Infracom have expressed interest in applying for the scheme.

“We’re not revealing the names of applicants right now, because all applicants are now currently undergoing evaluation by the specially appointed evaluation committee for ECMS. That said, we are fast-tracking the evaluation process, and special priority is being given to applications that are fully completed with all due information in place,” the minister added.

The latest electronics component booster is nearly 7x that of Meity’s previous Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (Specs) scheme, which was announced in April 2020. The latter offered total incentives worth $370 million, initially for three years and eventually extended by one more year. Specs ended on 31 March last year, drawing 49 investments totalling $1.6 billion—just 12% of what ECMS promises over six years.

Domestic push

“The manufacturing of sub-assemblies and components will now be firmly established in India, substantially increasing domestic manufacturing and global competitiveness,” said Pankaj Mohindroo, chairman of industry body India Cellular and Electronics Association (Icea). “This scheme is applicable for all verticals of electronics, thus building core competency and capacity. It is very encouraging to see over 60% participation by micro, small and medium enterprises, enabling large-scale employment growth as well.”

A senior executive at a domestic contract manufacturer, who requested anonymity, added that the strong interest among companies to apply for the Centre’s incentives is “a no-brainer.”

“Localizing specialized operations requires hefty investments, but the returns are equally, if not exponentially, higher. With the Centre offering incentives to ease the capital expenditure that’s required in such a field, there’s no doubt that application inflow is strong,” the executive said, whose firm is one of the applicants of Meity’s ECMS.

Industry estimates peg the value addition from electronics assemblies in India to be around 15%, since most components such as circuit boards and critical elements are largely imported from abroad. With ECMS, Meity is seeking to set up a local supply chain and reduce dependency on imports—among strong geopolitical divides and conflicts.

Vaishnaw also added that India is steadily adding further policies to support the landmark ECMS booster—including a $170-million ( ₹1,500 crore) scheme to recycle and extract critical minerals within the country.