Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Issues in the Phased Manufacturing Policy

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PMP and PLI Scheme

Mains level : Paper 3- Issues with Phased Manufacturing Policy

The Production Linked Incentive Scheme, though ambitious in its goal suffers from several fundamental issues. The article discuses such issues.

Background of the Phased Manufacturing Policy

  • The Phased Manufacturing Programme (PMP) incentivised the manufacture of low value accessories initially, and then moved on to the manufacture of higher value components.
  • This was done by increasing the basic customs duty on the imports of these accessories or components.
  • The PMP was implemented with an aim to improve value addition in the country.
  • Recently, 16 firms in the mobile manufacturing sector were approved for the Production Linked Incentive (PLI) scheme to transform India into a major mobile manufacturing hub.
  • The PLI comes on the back of a phased manufacturing programme (PMP) that began in 2016-17.

Issues to consider

1) More imports and less value addition in India

  • Firms such as Apple, Xiaomi, Oppo, and OnePlus have invested in India, but mostly through their contract manufacturers.
  • As a result, production increased from $13.4 billion in 2016-17 to $31.7 billion in 2019-20.
  • But factory-level production data from the Annual Survey of Industries (ASI) shows that more than 85% of the inputs were imported.
  • UN data for India, China, Vietnam, Korea and Singapore (2017-2019), show that except for India, all countries exported more mobile phone parts than imports.
  • More export than import by these countries indicate the presence of facilities that add value to these parts before exporting them.
  • India, on the other hand, imported more than it exported.
  • Therefore, while the PMP policy increased the value of domestic production, improvement in local value addition remains low.
  • The new PLI policy offers an incentive subject to thresholds of incremental investment and sales of manufactured goods.
  • Thus, focus remains on increasing value of domestic production, and not local value addition.

2) Shift from China unlikely

  • India produced around 29 crore units of mobile phones for the year 2018-19; 94% of these were sold in the domestic market.
  • This implies that much of the incremental production and sales under the PLI policy will have to be for the export market.
  • Recently, a study by Ernst & Young showed that if the cost of production of a mobile phone is say 100 (without subsidies), then the effective cost (with subsidies and other benefits) of manufacturing mobile phone in China is 79.55, Vietnam, 89.05, and India (including PLI), 92.51.
  • So, it may be premature to expect a major chunk of mobile manufacturing to shift from China to India.

3) PLI doesn’t strengthen the current export competitiveness

  • India’s mobile phone exports grew from $1.6 billion in 2018-19 to $3.8 billion in 2019-20, but per unit value declined from $91.1 to $87, respectively.
  • This shows that our export competitiveness seems to be in mobiles with lower selling price.
  • However, for foreign firms chosen under the PLI policy, the incentive will be at and above ₹15,000 ($204.65).
  • So, it is clear that the PLI policy does not strengthen our current export competitiveness in mobile phones.

4) Absence of domestic firms

  • Domestic firms have been nearly wiped out from the Indian market.
  • So, their ability to take advantage of the PLI policy and grab a sizeable domestic market share seems difficult.
  • Domestic firms may have the route of exporting cheaper mobile phones to other low-income countries.
  • However, their performance in the last couple of years has not been promising.

5) Importance of supply chain colocation

  • The six component firms that have been given approval under the ‘specified electronic components segment’do not complete the mobile manufacturing ecosystem.
  • For example, when Samsung set up shop in Vietnam, it relied heavily on its Korean suppliers which co-located with it to produce intermediate inputs, so much so that 63 among Samsung’s 67 suppliers then were foreign.
  •  Though Samsung is invested hugely in India, it has not colocated its supply chain in the country.
  • So, the foreign firms chosen under the PLI policy should be encouraged to colocate their supply ecosystems in the country.

6) Complaint at WTO against PMP

  • In September 2019, Chinese Taipei contested the raise in tariffs under the PMP.
  • If the PMP is found to be World Trade Organization (WTO) non-compliant, then we may be flooded with imports of mobile phones.
  • This might make the local assembly of mobile phones unattractive.
  • This will affect the operations of the mobile investments done under the PMP.

Conclusion

The PMP policy, since 2016-17 has barely been helpful in raising domestic value addition in the industry even though value of production expanded considerably.

B2BASICS

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Production Linked Incentive (PLI) Scheme for electronics manufacturers

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Production Linked Incentive Scheme (PLI)

Mains level : Electronic manufacturing promotion under Make in India

Global electronics giants are set to expand their presence in India under the Production Linked Incentive (PLI) Scheme for making mobile phones and certain other specified electronic components.

Try this question for mains:

Q. What is the Production Linked Incentive (PLI) Scheme? Describe its various features and benefits.

What is the PLI scheme?

  • As a part of the National Policy on Electronics, the IT ministry had notified the PLI scheme on April 1 this year.
  • The scheme will, on one hand, attract big foreign investment in the sector, while also encouraging domestic mobile phone makers to expand their units and presence in India.
  • It would give incentives of 4-6 per cent to electronics companies which manufacture mobile phones and other electronic components.
  • A/c 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.

Tenure of the scheme

  • The PLI scheme will be active for five years with financial year (FY) 2019-20 considered as the base year for calculation of incentives.
  • This means that all investments and incremental sales registered after FY20 shall be taken into account while computing the incentive to be given to each company.

Which companies and what kind of investments will be considered?

  • All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme.
  • These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.
  • Any additional expenditure incurred on the plant, machinery, equipment, research and development and transfer of technology for the manufacture of mobile phones and related electronic items will be eligible for the incentive.
  • However, all investment done by companies on land and buildings for the project will not be considered for any incentives or determine the eligibility of the scheme.

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

[pib] Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : SPECS

Mains level : Not Much

The Union Cabinet has approved Scheme for Promotion of manufacturing of Electronic Components and Semiconductors.

About SPECS

  • The scheme aims to offer the financial incentive of 25% of capital expenditure for the manufacturing of goods that constitute the supply chain of electronic products.
  • The scheme will help offset the disability for domestic manufacturing of electronic components and semiconductors in order to strengthen the electronic manufacturing ecosystem in the country.

Benefits

The proposal, when implemented, will lead to the development of electronic components manufacturing ecosystem in the country. Following are the expected outputs/outcomes in terms of measurable indicators for the scheme:

  • Development of electronic components manufacturing ecosystem in the country and deepening of Electronics value chain
  • New investments in Electronics Sector to the tune of at least Rs. 20,000 crore
  • Total employment potential of the scheme is approximately 6,00,000
  • Reducing dependence on import of components by large scale domestic manufacturing that will also enhance the digital security of the nation

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

[pib] Production Linked Incentive Scheme

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Production Incentive Scheme (PLI)

Mains level : Various schemes for Industrial promotion

The Union Cabinet has approved the Production Incentive Scheme (PLI) for Large Scale Electronics Manufacturing.

Production Incentive Scheme (PLI)

  • The scheme proposes production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components including Assembly, Testing, Marking and Packaging (ATMP) units.
  • The scheme shall extend an incentive of 4% to 6% on incremental sales (over a base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years subsequent to the base year as defined.
  • The proposed scheme is likely to benefit 5-6 major global players and few domestic champions, in the field of mobile manufacturing and Specified Electronics Components and bring in large scale electronics manufacturing in India.

Benefits

  • The scheme has a direct employment generation potential of over 2,00,000 jobs over 5 years.
  • It would lead to large scale electronics manufacturing in the country and open tremendous employment opportunities.  Indirect employment will be about 3 times of direct employment as per industry estimates.
  • Thus, the total employment potential of the scheme is approximately 8,00,000.

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Schemes for Electronic Manufacturing

Note4Students

From UPSC perspective, the following things are important :

Prelims level : EMC 2.0 Scheme

Mains level : Not Much

The Union Cabinet has approved financial assistance to the Modified Electronics Manufacturing Clusters (EMC2.0) Scheme

Background

  • To build and create requisite infrastructure ecosystem for electronics manufacturing; Ministry of Electronics and Information Technology notified Electronics Manufacturing Clusters (EMC) Scheme which was open for receipt of applications upto October, 2017.
  • A period of 5 years is available for disbursement of funds for the approved projects.
  • There was a need for continuation of such scheme in modified form for further strengthening the infrastructure base for electronics industry in the country and deepening the electronics value chain.

EMC 2.0 Scheme

  • The Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme would support setting up of both Electronics Manufacturing Clusters (EMCs) and Common Facility Centers (CFCs).
  • For the purpose of this Scheme an EMC would set up in geographical areas of certain minimum extent, preferably contiguous, where the focus is on development of basic infrastructure, amenities and other common facilities for the ESDM units.
  • For Common Facility Centre (CFC) there should be a significant number of existing ESDM units located in the area and the focus is on upgrading common technical infrastructure and providing common facilities for the ESDM units in such EMCs, Industrial Areas/Parks/industrial corridors.

Aims and objectives

  • The scheme aims for development of world class infrastructure along with common facilities and amenities through Electronics Manufacturing Clusters (EMCs).
  • It is expected that these EMCs would aid the growth of the ESDM sector, help development of entrepreneurial ecosystem, drive innovation and catalyze the economic growth of the region by attracting investments in the sector, increasing employment opportunities and tax revenues.

Benefits

The Scheme will create a robust infrastructure base for electronic industry to attract flow of investment in ESDM sector and lead to greater employment opportunities.  Following are the expected outputs/outcomes for the Scheme:

  • Availability of ready infrastructure and Plug & Play facility for attracting investment in the electronics sector:
  • New investment in electronics sector
  • Jobs created by the manufacturing units;
  • Revenue in the form of taxes paid by the manufacturing units

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Draft electronics policy: Govt aims $400-billion electronics manufacturing sector by 2025

Note4students

Mains Paper 3: Economy | Changes in industrial policy and their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Particulars of the draft policy

Mains level: Electronics manufacturing sector in India


News

Draft Electronics Policy

  1. With an aim to create $400-billion electronics manufacturing industry by 2025, the Ministry of Electronics and Information Technology has come out with a draft electronics policy.
  2. The government is working on a framework to increase the competitiveness of made in India electronics products that will include efforts to improve the ease of doing business.
  3. According to the draft, the government plans to end modified special incentive scheme with new schemes that it will find easier to implement such as interest subsidy and credit default guarantee etc.
  4. Modified Special Incentive Package scheme (M-SIPS) was launched in 2012 which provided for capital subsidy of 25 per cent for Electronics Industry located in non-SEZ area and 20 per cent for those in SEZ areas.
  5. One of the objectives of the policy is to provide support for “significantly” enhancing availability of skilled manpower in the electronics system design and manufacturing industry.

Key propositions of the draft Policy

  1. The policy aims to push development of core competencies in all the sub-sectors of electronics including electronic components and semiconductors, defence electronics, automotive electronics, industrial electronics, strategic Electronics etc.
  2. The draft also proposes suitable direct tax benefits, including inter-alia investment-linked deduction under Income Tax Act for electronics manufacturing sector, for setting up of a new manufacturing unit or expansion of an existing unit.

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

India Post strikes it rich with cash-on-delivery payments

  1. News: India Post is expecting cash transactions under cash-on-delivery model of payment to be about Rs 1,500 crore for FY 2015-16
  2. Reason: It has taken major initiatives to strengthen its position for the e-commerce business requirements
  3. Fact: The Department of Posts, with its network of nearly 1.55 lakh post offices, is the largest postal network in the world
  1. News: India Post is expecting cash transactions under cash-on-delivery model of payment to be about Rs 1,500 crore for FY 2015-16
  2. Reason: It has taken major initiatives to strengthen its position for the e-commerce business requirements
  3. Fact: The Department of Posts, with its network of nearly 1.55 lakh post offices, is the largest postal network in the world

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Rajasthan celebrates first IT Day, launches connectivity network

  1. News: Rajasthan recently (21st May) celebrated its first IT day
  2. Theme: Promotion of IT Start-ups
  3. Context: State govt launched RajNET, a wide area network connecting the State capital with all 9,894 gram panchayats and 183 municipal areas
  4. Aim: To strengthen connectivity and allow the inclusion of remote areas through Information Technology.
  5. Facilitates: voice, video and data connection, enabling effective delivery of citizen services like Bhamashah, e-Mitra and MNREGA across the State
  1. News: Rajasthan recently (21st May) celebrated its first IT day
  2. Theme: Promotion of IT Start-ups
  3. Context: State govt launched RajNET, a wide area network connecting the State capital with all 9,894 gram panchayats and 183 municipal areas
  4. Aim: To strengthen connectivity and allow the inclusion of remote areas through Information Technology.
  5. Facilitates: voice, video and data connection, enabling effective delivery of citizen services like Bhamashah, e-Mitra and MNREGA across the State

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Telecom Ministry seeks 250% rise in planned Budget

  1. News: Telecom Ministry has sought a planned Budget outlay of Rs.18,214.32 crore for 2016-17
  2. Context: Major chunk of demand of Rs. 8,230 crore comes for implementation of defence service network project
  3. About Defence Service Network: To build an exclusive dedicated alternate communication network for defence services so that the military can free the spectrum for offering mobile services
  4. Proposal for: Double allocation for Universal Obligation Fund which aims to augment the infrastructure and increase telecom coverage in the rural and remote areas
  5. Funds under this head: be utilised for laying optical fibre under National Optical Fibre Network programme
  1. News: Telecom Ministry has sought a planned Budget outlay of Rs.18,214.32 crore for 2016-17
  2. Context: Major chunk of demand of Rs. 8,230 crore comes for implementation of defence service network project
  3. About Defence Service Network: To build an exclusive dedicated alternate communication network for defence services so that the military can free the spectrum for offering mobile services
  4. Proposal for: Double allocation for Universal Obligation Fund which aims to augment the infrastructure and increase telecom coverage in the rural and remote areas
  5. Funds under this head: be utilised for laying optical fibre under National Optical Fibre Network programme

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Govt allows sharing of active telecom infra

  1. Context: The department of telecommunications (DoT) has decided to allow sharing of active telecom Infrastructure
  2. Active infra: such as antennae, feeder cables, and transmission systems, Radio Access Network (RAN)
  3. Effect: expected to lower costs for operators and lead to faster rollout of networks
  4. Spectrum sharing: Last year, DoT allowed sharing of spectrum, a critical resource for expansion of telecom networks
  5. Benefit: Help operators enhance their network coverage area and fill the gaps, enabling them to improve quality of service
  6. Earlier: operators were allowed to share only passive infrastructure such as towers, repeaters, and shelters
  1. Context: The department of telecommunications (DoT) has decided to allow sharing of active telecom Infrastructure
  2. Active infra: such as antennae, feeder cables, and transmission systems, Radio Access Network (RAN)
  3. Effect: expected to lower costs for operators and lead to faster rollout of networks
  4. Spectrum sharing: Last year, DoT allowed sharing of spectrum, a critical resource for expansion of telecom networks
  5. Benefit: Help operators enhance their network coverage area and fill the gaps, enabling them to improve quality of service
  6. Earlier: operators were allowed to share only passive infrastructure such as towers, repeaters, and shelters

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Minister for Telecom & IT to Launch Electronics Development Fund (EDF)

  1. Background: The Electronics Development Fund Policy was launched by Prime Minister, during the inauguration of Digital India Week on 1st July 2015
  2. Context: Government has appointed CANBANK Venture Capital Fund Pvt. Ltd. to house EDF
  3. Ministry: EDF an initiative of IT Department is formulated as a “Fund of Funds” to participate in “Daughter Funds”
  4. Beneficiaries: Daughter Funds (set up to achieve the objectives of the EDF policy) registered in India
  5. Regulation: Abiding by the relevant rules and regulations including the SEBI regulations on Venture Fund
  1. Background: The Electronics Development Fund Policy was launched by Prime Minister, during the inauguration of Digital India Week on 1st July 2015
  2. Context: Government has appointed CANBANK Venture Capital Fund Pvt. Ltd. to house EDF
  3. Ministry: EDF an initiative of IT Department is formulated as a “Fund of Funds” to participate in “Daughter Funds”
  4. Beneficiaries: Daughter Funds (set up to achieve the objectives of the EDF policy) registered in India
  5. Regulation: Abiding by the relevant rules and regulations including the SEBI regulations on Venture Fund

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Government forms panel to study wage structure of gramin dak sevaks

  1. To examine the wage structure, service conditions of the Gramin Dak Sevaks (GDS) in the Department of Posts (DoP).
  2. It is one member committee comprising of Kamlesh Chandra, Retired Member of Postal Services Board.
  3. The Committee will go into the service conditions of GDS and suggest changes as considered necessary.
  4. Examine the present system of Branch Post Offices, engagement conditions and existing structure of wage and enrolments paid to the GDS and recommend necessary changes.
  1. To examine the wage structure, service conditions of the Gramin Dak Sevaks (GDS) in the Department of Posts (DoP).
  2. It is one member committee comprising of Kamlesh Chandra, Retired Member of Postal Services Board.
  3. The Committee will go into the service conditions of GDS and suggest changes as considered necessary.
  4. Examine the present system of Branch Post Offices, engagement conditions and existing structure of wage and enrolments paid to the GDS and recommend necessary changes.
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