The India Cellular and Electronics Association (ICEA) is urging the government for a Rs 300-350 billion production-linked incentive (PLI) scheme for components and sub-assemblies, along with capital expenditure backup to support surging exports of mobile phones and other electronics.
As per ICEA, the PLI scheme is needed to support growing demand for electronics components to the tune of $75-$80 billion by 2026, and $300 billion by 2032 to support $300 billion worth of electronics products manufacturing by 2026 and $1.2 trillion by 2032.
The scheme’s objective is to boost domestic value addition, especially in mobile phone manufacturing to 35-40 per cent, from 18 per cent now. In addition, component manufacturing should run parallel to the development of semiconductor ecosystem, currently underway in India. It further added that the component ecosystem would take at least 2-3 years to start commercial production. As per ICEA, once it takes off, domestic manufacturing of components should be able to cater to 5-10 per cent of global demand in 6-7 years. Moreover, international firms should be invited to get a major share in the domestic and global component manufacturing market.
In its submission to the Ministry of Electronics and Information Technology (MeitY), ICEA has demanded PLI support with 4-6 per cent incentive structure for manufacturing of sub-assemblies (camera modules, display assembly, vibrator motors, etc), high-end printed circuit boards, thru- hole passive components and surface-mount components.
It has also recommended the PLI plan for a period of eight years, with the flexibility to claim incentives for six years within the tenure.
Further, ICEA has recommended companies which commit a threshold investment of Rs 10 billion or more to make surface mount device (SMD) passive components, lithium-ion cells, and high-end printed circuit boards (PCBs) should be supported by providing them with 40 per cent of the capex support on parri-passu basis, along with supporting production of raw materials and other inputs for the components with an average incentive of 5 per cent for a period of six years.
Furthermore, according to ICEA, supply chain ancillary units for supporting the above-mentioned component manufacturing should be supported by offering them 25 per cent capex support. For critical sub-assemblies and components such as connectors, mechanics, vibrator motors, camera modules, display assemblies, speaker modules, should be provided with 4-6 per cent incentive tied to incremental sales. Moreover, ICEA has sought interest subvention of 5 per cent for component production on term loans and for working capital requirements to subvert the high cost of finance in India.
