IT Ministry okays Rs 7,877-cr worth projects under ECMS

Why in the News

The Ministry of Electronics and Information Technology (MeitY) approved 31 more applications worth Rs 7,877 crore under the Electronics Components Manufacturing Scheme (ECMS), spread across 10 States. Cumulative approved investment under the scheme has crossed Rs 69,548 crore against an original target of Rs 59,350 crore, while committed employment stands at about 75,000 against a target of 91,600.

What is the Electronics Components Manufacturing Scheme (ECMS)?

1. About: ECMS is a MeitY scheme that gives incentives for manufacturing passive and active electronic components and sub assemblies inside India, rather than finished devices.
2. Objective: It targets the segment of the electronics value chain that India still imports, such as capacitors, connectors, enclosures and display modules.
3. Incentive structure: Approved projects receive turnover linked or capex linked incentives released only on achieving stated milestones.
4. Original targets: The scheme set an investment target of Rs 59,350 crore, a production target of Rs 4.56 lakh crore and an employment target of 91,600 jobs.
5. Approval cadence: Approvals are cleared in weekly or ten day cycles by an approval meeting, making it one of the fastest moving programmes of the Ministry.

What is a turnover linked and a capex linked incentive?

1. Turnover linked incentive: The payout is calculated as a percentage of incremental sales of the manufactured component, so support flows only after the plant actually produces and sells.
2. Capex linked incentive: The payout is a share of eligible capital expenditure on plant and machinery, which lowers the upfront cost of building a component fabrication line.

What are optical transceivers?

1. About: An optical transceiver is a module that converts electrical signals into light pulses for transmission through optical fibre and converts them back at the receiving end.
2. Why it matters: These modules are the core hardware of data centres and telecom backhaul networks, and India has so far imported almost all of its requirement.

What are copper clad laminates?

1. About: A copper clad laminate is a sheet of insulating resin material bonded with copper foil, and it is the base substrate on which every printed circuit board (PCB) is etched.
2. Strategic value: Without domestic laminate capacity, a PCB plant remains an assembly operation dependent on imported substrate.

What does the latest tranche of approvals contain?

1. Volume: 31 applications involving proposed investment of Rs 7,877 crore were cleared, spread across 10 States.
2. States covered: The tranche covers Himachal Pradesh, Uttarakhand, Uttar Pradesh, Haryana, Gujarat, Maharashtra, Goa, Karnataka, Tamil Nadu and Telangana, with Tamil Nadu taking the highest share at seven project approvals.
3. Product range: Approvals span capital goods, camera and display modules, anode materials, enclosures, connectors, rare earth permanent magnets, optical transceivers, speakers and microphones, antennas, capacitors, coils and filters.
4. First time products: Several parts have never been manufactured in India before, including electrolyte additives, hermetic terminals used for defence grade sealed assemblies, metalised films for capacitors and coils.
5. An enhancement, not a new plant: Wipro Global’s copper clad laminates project accounted for a Rs 11,033 crore increase in project value, leaving about Rs 6,844 crore in approvals for genuinely fresh projects.
6. Expected output: The tranche is expected to lead to production worth Rs 82,243 crore and close to 10,000 direct jobs.

Where does the scheme stand against its own targets?

1. Applications cleared: 106 applications have now been approved, covering around 30 product categories across 15 States.
2. Investment overshoot: Cumulative proposed investment has reached Rs 69,548 crore, crossing the original target of Rs 59,350 crore.
3. Production overshoot: Expected production from approved projects stands at Rs 5.34 lakh crore against an original target of Rs 4.56 lakh crore.
4. Employment shortfall: Selected companies have committed close to 75,000 jobs against the scheme’s total target of 91,600.
5. Official position on the gap: The IT Secretary stated that the employment target has not yet been reached and would be reached shortly.

How complete is the claim of atmanirbharta in components?

1. Fully covered segments: The IT Minister stated that approved projects make India atmanirbhar in planned supplies of enclosures for devices, relays, anode material and optical transceivers.
2. Relays as an export line: Relays under the approved projects are already being exported, not merely substituting imports.
3. Partial coverage in laminates: Laminates are being produced at 80 per cent of domestic demand.
4. Partial coverage in connectors and cells: Domestic production stands at 75 per cent for connectors, 60 per cent for lithium ion cells and 55 per cent for transducers.
5. Reading the numbers: Self reliance has been claimed for four narrow product lines, while the higher value and higher volume segments remain partially import dependent.

Which approved projects have actually reached production?

1. Operational plants: ATL’s lithium ion cell facilities at Rewari and Sohna and Tata Electronics’ enclosure plant at Hosur are currently operational.
2. Nearing commissioning: Kaynes Circuits’ PCB plant near Chennai is expected to start operations within about a month.
3. Two to three month horizon: Motherson’s enclosure facility at Kanchipuram and Wipro Global’s copper clad laminate plant are expected to start in the next two to three months.
4. Four month horizon: Dixon’s display and camera module facility at Noida is expected to go live within four months.
5. Approval versus asset: Most of the Rs 69,548 crore approved remains a commitment on paper, since only three plants are producing today.

Why is investment running ahead of employment under ECMS?

1. Capital intensity of components: Component fabrication uses automated deposition, winding and moulding lines, so output scales with machinery rather than with headcount.
2. Incentive design: Both the turnover linked and the capex linked routes reward sales and capital spending, and neither makes disbursal conditional on the jobs actually created.
3. Nature of the products: Enclosures, laminates and magnets are process industries, unlike mobile phone assembly under earlier programmes where manual assembly lines absorbed large workforces.
4. Skill mismatch: Component plants need process technicians and materials engineers, and the shortage of that specific pool caps hiring even where capacity exists.
5. The policy consequence: Import substitution in value terms is being achieved faster than the employment objective the scheme was also sold on.

Challenges to the Electronics Components Manufacturing Scheme

1. Dependence on imported inputs one layer down: Localising a component often shifts import dependence to its raw material rather than removing it. e.g. domestic lithium ion cell plants at Rewari still import cathode active material and separators.
2. Rare earth supply concentration: Permanent magnet manufacturing approved under the scheme depends on rare earth feedstock controlled by a single supplier country. e.g. China’s April 2025 export controls on seven rare earth elements disrupted Indian and global automotive magnet supply.
3. Slow conversion of approvals into plants: A large approval pipeline can stall at land, power and clearance stages. e.g. only three ECMS plants are operational while 106 applications stand approved.
4. Thin margins in passive components: Capacitors, connectors and coils are low margin commodity items where scale determines survival. e.g. global capacitor pricing is set by high volume producers in Japan, South Korea and Taiwan, leaving little room for a new entrant.
5. Design capability gap: Manufacturing incentives do not create intellectual property, so the high value design layer stays offshore. e.g. India assembles and now fabricates components, while chip design ownership for most consumer devices sits with firms in the United States, South Korea and Taiwan.
6. Employment target risk: A shortfall in the jobs commitment weakens the political case for continuing the outlay. e.g. committed jobs stand at about 75,000 against the scheme target of 91,600.
7. Testing and certification infrastructure: Components need qualification testing before global original equipment manufacturers accept them. e.g. automotive grade and defence grade parts such as hermetic terminals need long reliability qualification cycles that Indian labs are only now building.

Conclusion

ECMS has crossed its investment and production targets well ahead of schedule, while its employment target remains unmet. The scheme has proved that capital will come to component manufacturing when the incentive is priced correctly, and that value addition in this segment is capital intensive rather than labour intensive. The next test is conversion, since only three approved plants are producing today against 106 approved applications. The Ministry expects further approvals in weekly cycles and states that the employment target will be reached shortly.

Electronics Manufacturing in India

1. About: Electronics manufacturing covers the making of finished devices, sub assemblies such as display and camera modules, and discrete components such as capacitors, connectors, resistors and printed circuit boards.
2. Scale: India’s electronics production has crossed Rs 11 lakh crore in recent years, with mobile phones forming the single largest segment.
3. Global standing: India is the second largest mobile phone manufacturer in the world by volume, after China.
4. Structural weakness: Value addition remains concentrated in final assembly, with components and sub assemblies contributing the bulk of the import bill.
5. Trade position: Electronic goods have become one of India’s fastest growing export categories, driven mainly by smartphone exports.
6. Employment profile: The sector is a large formal sector employer for semi skilled workers, with contract electronics manufacturers operating the largest plants.

Constitutional and Statutory Framework Governing Electronics Manufacturing

1. Article 246 with Entry 52 of the Union List: Empowers Parliament to regulate industries declared by law to be expedient in the public interest, the constitutional basis for central industrial policy.
2. Entry 41 of the Union List: Covers trade and commerce with foreign countries and import and export across customs frontiers, the basis for tariff action on components.
3. Entry 33 of the Concurrent List: Covers trade and commerce in, and production and supply of, products of controlled industries.
4. Article 265: Bars any levy of tax except by authority of law, the basis for customs duty structures used in the phased manufacturing approach.
5. Article 282: Permits the Union to make grants for any public purpose, the source of authority for incentive disbursals under a scheme.

Laws and Rules Governing Electronics Manufacturing

1. Information Technology Act, 2000: Provides the legal framework for electronic records and cyber security, and is the parent statute for rules governing electronic hardware security.
2. Information Technology (Information Security Practices and Procedures for Protected System) Rules, 2018: Set security obligations for designated protected systems.
3. Bureau of Indian Standards Act, 2016: Enables compulsory registration of electronic products and mandatory conformity to Indian standards before sale.
4. Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order: Brings notified electronic goods under mandatory BIS registration.
5. Customs Act, 1962 with the Customs Tariff Act, 1975: Provide the duty structure used to raise the cost of imported finished goods relative to components.
6. Environment (Protection) Act, 1986: Parent statute for the rules governing hazardous inputs and end of life electronics.
7. Electronic Waste (Management) Rules, 2022: Impose extended producer responsibility targets on producers of electrical and electronic equipment.
8. Legal Metrology Act, 2009: Governs declarations on packaged electronic goods, including country of origin.
9. Foreign Trade (Development and Regulation) Act, 1992: Provides the power to restrict or license imports of specified electronic items.

Back2Basics: Production Linked Incentive (PLI) Scheme

1. Administering authority: Individual PLI schemes are run by their respective line ministries, with overall coordination by NITI Aayog and the Department for Promotion of Industry and Internal Trade.
2. Launch year: The first PLI scheme, for Large Scale Electronics Manufacturing, was announced in 2020, and the framework was later extended to 14 sectors.
3. Aim: To raise domestic manufacturing output and exports by paying an incentive on incremental sales of goods manufactured in India over a base year.
4. Sectors covered: Sectors include mobile phones and electronic components, pharmaceuticals, automobiles and auto components, telecom, food processing, white goods, textiles, drones, advanced chemistry cell batteries and specialty steel.
5. Design feature: Support is outcome linked, since disbursal follows achievement of stated investment and incremental sales thresholds rather than mere project approval.
6. Targeted beneficiaries: Large anchor manufacturers and their supplier ecosystems, including contract manufacturers and component vendors.

Government Initiatives for Electronics Manufacturing

1. Semicon India Programme: Provides fiscal support for semiconductor fabrication units, display fabs, assembly and testing units and compound semiconductor facilities.
2. PLI for Large Scale Electronics Manufacturing: Incentivises incremental sales of mobile phones and specified electronic components by large manufacturers.
3. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): Offered capital expenditure support for the electronic component ecosystem.
4. Modified Electronics Manufacturing Clusters Scheme (EMC 2.0): Funds common infrastructure and ready built factory sheds for electronics clusters.
5. National Policy on Electronics, 2019: Sets the policy goal of positioning India as a global hub for electronics system design and manufacturing.
6. Phased Manufacturing Programme: Uses a calibrated duty structure over time to move production from imported finished units to domestically made sub assemblies and components.
7. Design Linked Incentive Scheme: Supports domestic companies in integrated circuit and chipset design, targeting the intellectual property layer.

Key Facts about Electronics Manufacturing in India

1. Nodal ministry: Ministry of Electronics and Information Technology.
2. Second largest producer: India is the second largest producer of mobile phones globally by volume.
3. Component share: Components and sub assemblies account for the largest share of the electronics import bill.
4. First semiconductor unit: India’s first commercial semiconductor assembly and packaging units were approved under the Semicon India Programme in Gujarat and Assam.
5. Cluster geography: Tamil Nadu, Uttar Pradesh, Karnataka and Andhra Pradesh host the largest concentration of electronics manufacturing capacity.
6. Export status: Electronic goods have entered India’s top three export categories by value.

Challenges in India’s Electronics Manufacturing Sector

1. Component import dependence: Domestic value addition stays low when only final assembly happens in India. e.g. a smartphone assembled in India still uses an imported display, camera module and battery cell.
2. Scale disadvantage against incumbents: Global component makers operate at volumes that Indian entrants cannot match on cost. e.g. Vietnam attracted large display and camera module plants before India entered the segment.
3. Logistics and clearance cost: Electronics inputs move by air on tight cycles and are sensitive to port and customs delay. e.g. component consignments cleared through Chennai and Bengaluru air cargo face longer dwell time than Shenzhen or Ho Chi Minh City.
4. Power quality and reliability: Component fabrication needs uninterrupted, clean power, and outages destroy an entire process batch. e.g. semiconductor and laminate lines require captive backup because a momentary voltage dip scraps work in progress.
5. Shortage of process engineering talent: India trains software engineers in far greater numbers than materials and process engineers. e.g. semiconductor fabrication units in Gujarat have had to plan overseas training programmes for their first operating cohorts.
6. Geopolitical supply concentration: Critical inputs and processing capacity sit in a small number of countries. e.g. China processes the overwhelming majority of the world’s rare earths and battery grade graphite.
7. Incentive dependence: Competitiveness that rests on fiscal support weakens when the incentive window closes. e.g. several PLI beneficiaries in other sectors missed year one thresholds and forfeited that year’s incentive.

Way Forward

1. Move incentives down the value chain: Extend support to materials such as electronic grade chemicals, substrates and battery grade active materials, so localisation does not stop at the assembled component.
2. Link disbursal partly to employment: Introduce a jobs component in the incentive formula so the employment target does not remain an aspiration detached from payout.
3. Build testing and certification capacity: Fund accredited reliability and qualification laboratories so Indian components clear automotive, defence and telecom grade approvals domestically.
4. Secure critical inputs through overseas assets: Use long term offtake agreements and equity in rare earth and graphite assets abroad to insulate magnet and cell manufacturing.
5. Create a components skilling pipeline: Run dedicated process technician programmes with industrial training institutes located inside electronics clusters.
6. Compress project timelines: Provide single window land, power and environmental clearance for approved ECMS projects to convert approvals into operating plants faster.
7. Support design ownership: Expand the Design Linked Incentive Scheme so domestic firms hold intellectual property rather than only manufacturing capacity.

Matching Previous Year Question

“[2025, GS3, 15 marks] Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?”