PLI for Components to Bolster Local Value Addition, Foster $500 bn Manufacturing Ecosystem: Industry

Welcoming the government’s decision of rolling out the Rs 22, 919 crore Production Linked Incentive (PLI) scheme for promoting passive electronic component (non-semiconductor electronic components) manufacturing in the country, industry stakeholders said it was a long standing demand which will address the issue of low domestic value addition (DVA) and attract global and domestic investment in the sector.

The scheme will also help the industry to deepen integration with global value chains (GVCs), establish large-scale manufacturing units, and enable significant employment generation.

The Union Cabinet on Friday approved the much awaited PLI scheme for passive electronic component manufacturing with an outlay of Rs 22,919 crore.

The scheme aims to attract investment of Rs 59,350 crore, resulting in production of Rs 4,56,500 crore worth of products, the government said in a statement. The scheme may create an additional direct employment of 91,600 and many indirect jobs as well.

This is the first such scheme for promoting manufacturing of passive components in the country.

The tenure of the scheme is six years with one year of gestation period.

“As India scales its production to reach $500 billion to deepen the electronics manufacturing ecosystem and increase domestic value addition, this policy will usher in a new era of growth,” said Pankaj Mohindroo, Chairman of India Cellular & Electronics Association (ICEA).

Electronics manufacturing in India has seen a surge in the last few years. Domestic production has increased 400% to an estimated $135-140 billion over the last decade since FY15.

This growth was led by smartphone manufacturing, in which India is the second largest country with a production of $60 billion in the ongoing financial year.

However, domestic value addition in electronics production remained low. India imports PCB’s, passive components (capacitors, inductors, resistors), display modules, etc. which constitute 15-20% of the bill of material of the electronic products in addition to semiconductors.

The long awaited scheme will attract more investments in system products and enable just in time manufacturing, experts said.

It will lead to more companies and startups designing and making products to enable India to be an electronics product nation, said HCL Founder and Chairman EPIC Foundation Ajai Chowdhry.

“We also eagerly await the design in India scheme for chips and systems that will complete the full ecosystem," he said.

Mahindroo said that the PLI scheme for electronics component manufacturing will also help the one for IT hardware. “This is on top of the IT hardware scheme. So, it is a further sweetener,” he said.

Under the IT hardware scheme, a majority of eligible companies have been unable to meet the incremental sales target due to weak demand.

He hoped that the government will come out with the guidelines of the scheme after extensive consultation with the industry and will balance the interests of the government as well as the industry.

The government has linked some part of the incentive under the scheme with employment targets achievement, which Mahindroo said are very realistic and would not deter companies from participating in the scheme.

“Assembling has more employment. Because of high capital intensity and mechanization, deeper components have lower employment but the employment targets are not unrealistic,” he said.

Experts say that the scheme shows the government’s commitment towards growth of ESDM sector for multiple applications.

“Alongside the semiconductor manufacturing ramp-up and the existing PLI for electronics manufacturing, these initiatives will enhance India's global competitiveness,” said Ashok Chandak, president of India Electronics and Semiconductor Association.

He said such strategic steps will help India to meet domestic demand and expand exports, cementing its position as a global powerhouse in electronics and semiconductors.