Rs 10,000-cr incentive package for electronics manufacture on the anvil

New Delhi: The Government is formulating a special incentive package to encourage local manufacturing of electronic goods including mobile handsets, semiconductor wafer fab, consumer electronics and telecom network equipment.

The package includes reimbursement of indirect taxes and a subsidy of 20 per cent on capital expenditure made by high-tech manufacturers in SEZ units. Investments made in non-SEZ units could get a subsidy of 25 per cent. The Ministry of Finance has agreed to the proposal with a ceiling of Rs 10,000 crore during the 12th Plan.

The subsidy element may be linked to the project outcome in a bid to ensure that companies invest in cutting edge technologies that's marketable.

For example, in the case of semiconductor wafer fab, 75 per cent of the overall subsidy could be linked to production milestones.

The incentive package was discussed on Monday at a meeting between the Department of Electronics and IT (DEITy) and the Planning Commission. A senior official told Business Line, “The Planning Commission is in favour of such a policy. It will take some more meetings to finalise the draft.”

According to top Government sources, the Department of Commerce has also concurred with the proposal, confirming compatibility to India's commitment to various international bodies including the WTO on subsidies.

In order to raise the initial corpus for the project, the DEITy has proposed to levy a cess on all electronic products sold in the country. The revenue earned from the cess will be put into the National Electronics Mission fund. According to estimates made by DEITy, the Government will end up being a net revenue earner by 2020.

The department has presented three scenarios with different production targets. If the production reaches $400 billion by 2020, then the Government subsidy will amount to $32.85 billion while the revenue accruals will be $58.52 billion according to the projections made by DEITy.

This is part of Government's efforts to boost manufacturing in the country. Over the past few months, the Government has taken a series of steps including formulating a National Policy on Electronics. The policy had made it mandatory for Government agencies to give preferential access to electronic products made in the country.