MEITY (IPHW Division) Notification on Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS)

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This is the MEITY [Ministry Of Electronics And Information Technology] notification released on April 1,2020 on Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS). The Government attaches high priority to electronics hardware manufacturing as it is one of the important pillars of both “Make in India” and “Digital India” programmes of Government of India.

Electronics manufacturing industry in India presently faces disability of the order of the order of 8 – 10% compared to competing economies in different segments of electronics manufacturing as well as different stages of the value chain.

Domestic electronics manufacturing has increased substantially over the last few years and is steadily moving from Semi Knocked Down (SKD) to Completely Knocked Down (CKD) level of manufacturing.

However, domestic value addition continues to be low in the range of 10 – 30% only. This is due to the lack of electronic components manufacturing ecosystem, near absence of semiconductor manufacturing ecosystem and absence of display manufacturing ecosystem in the country. Major growth of domestic electronics manufacturing has occurred on account of assembly of finished products from imported electronic components/ sub-assemblies/ parts, mainly catering to the domestic demand.

Development of supply chain is essential for the manufacturing of electronic products with higher domestic value addition. The vision of National Policy on Electronics 2019 (NPE 2019) notified on 25.02.2019 is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.

The manufacturing of electronic components and semiconductors is capital intensive and must deal with constantly changing technology. Components are at the heart of electronic products and constitute a significant part of the total value of Bill of Material (BOM). A vibrant electronic component manufacturing ecosystem is vital for the overall long-term and sustainable growth of electronics manufacturing in India and to achieve net positive Balance of Payments (BoP).

The main impediments in the way of attracting investments for manufacturing of electronic components/semiconductors include import at “Nil” Basic Customs Duty (BCD) as most of the electronic components/semiconductors are covered under the Information Technology Agreement (ITA-1) of WTO; high cost of capital to set up global scale capacities to be competitive; inadequate infrastructure; lack of availability of adequate, reliable and quality power as well as water supply at competitive rates; lack of supply chain; high logistics costs; lack of technology etc.

The Modified Special Incentive Package Scheme (M-SIPS) was designed as a scheme to provide financial incentives to help to offset the disability and high upfront cost and thereby attract investments in the electronics manufacturing sector. This scheme was open to receive applications till 31.12.2018 for new projects as well as expansion projects. The scheme provided subsidy for investments in capital expenditure for setting up electronics manufacturing facilities (20% for units set up in SEZs units and 25% for non-SEZ units). M-SIPS has played an important role in promoting investments in electronics manufacturing in India.

It is proposed to offer financial incentive of 25% of capital expenditure for the manufacturing of goods as per list annexed that constitute the supply chain of an electronic product under the Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS).

The scheme will help offset the disability for domestic manufacturing of components and semiconductors in order to strengthen the electronics manufacturing ecosystem in the country. Eligibility: The SPECS will be applicable to investments in new units as well as expansion of capacity/modernization and diversification of existing units.

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