Cabinet nod for electronics component scheme likely by Jan-end: Sources

Electronics component PLi

The Ministry of Electronics and Information Technology (MeitY) proposal for the long-awaited component manufacturing scheme is likely to get the Cabinet nod later this month, paving the way for its rollout in April, sources told Moneycontrol.

MeitY officials met with industry stakeholders late in December to discuss capital and operational subsidies across various component categories. “As per industry demands, the proposed outlay remains Rs 40,000 crore,” one of the sources said.

While reports suggest the final allocation might be reduced to Rs 25,000 crore, the sources cited clarified that no final decision had been made. The industry continues to advocate for the full Rs 40,000-crore outlay.

The government hopes the scheme will generate electronics component production worth $50–60 billion over its five-to-six-year tenure. The policy will succeed the Rs 3,285-crore Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which ended on March 31, 2024. SPECS provided a 25 percent incentive on capital expenditure for manufacturing.

Incentives under the component scheme will be product-specific, based on factors such as manufacturing challenges and localisation levels. Products with higher manufacturing constraints or cost disadvantages compared to China and Vietnam will qualify for greater incentives. The incentive amount will be directly linked to the degree of localisation achieved.

The new scheme aims to increase domestic value addition in electronics components from 15-18 percent to 35-40 percent initially, with a long-term goal of 50 percent.

The government also plans to phase out the smartphone PLI scheme by merging it with the new component initiative. While the smartphone PLI, the most successful among the 14 such schemes, is set to end in 2025-26, it could be extended for two more years.

The India Cellular & Electronics Association (ICEA) and Electronic Industries Association of India (ELCINA) have proposed a Rs 40,000–45,000-crore outlay, emphasising capital expenditure support. They argue that the scheme is essential to meet the growing demand for electronic components, projected at $75–80 billion by 2026 and $300 billion by 2032, supporting manufacturing worth $1.2 trillion by the same year.

Ahead of the Union Budget 2025, electronics companies have urged the finance ministry to simplify the import tariff structure by reducing levies on parts, inputs, and sub-components to zero from 2.5 percent.

The ICEA highlighted that high tariffs significantly increase manufacturing costs and reduce India’s global competitiveness. It said India’s current tariff regime, with multiple rates and surcharges, is among the most complex globally. This complexity impacts competitiveness and export potential.

The ICEA proposed reducing the duty on sub-assembly inputs for television open cells to zero from 2.5 percent. It also sought rationalisation of duties on components to support domestic manufacturing of hearable devices.

The body also recommended reducing tariffs on components like BLUs, cover glass, and open cells from 15 percent to zero to address cost inefficiencies. It also flagged inverted duties, which increase costs and cause supply chain inefficiencies, as another area requiring attention.