Jan 11, 2013

M-SIPS for Electronics Industry - The $4 Billion Push

Electronics manufacturing industry will get a shot in the arm with applications being invited to apply under M-SIPS, the Modified Special Incentive Package Scheme, which aims to bridge the gap in demand and supply of domestically produced electronics hardware in India. 

The issue of our struggling electronic manufacturing industry, and the failure of earlier Special Incentive Package Scheme of 2007, and related issues were highlighted by the blogger here, here and here. This Modified SIPS was notified some time back, but the applications are being accepted from today. The idea is, of course, to help India become a hub for electronic hardware manufacturing, including fabs (semiconductor wafer fabrication units). 


The urgency for this measure can be sensed from the plot shown above (from task force report), which projects the Indian imports of electronics to grow to around 300 Billion dollars by 2020, and this will have a devastating effect on the Balance of Payment, surpassing probably the oil imports. 

Highlights of the MSIPS scheme (From Press Information Bureau report)

"The M-SIPS scheme provides following incentives:
  • Capital Expenditure (Capex) subsidy of 25% in non-SEZ and 20 % within SEZ
  • Reimbursement of CVD/excise for capital equipment for non-SEZ units
  • Reimbursement of central taxes and duties for 10 years in select high- tech units like fabs.
The Capex includes not only expenditure incurred on plant, machinery and equipment, tools etc but also expenditure incurred on captive power plant, utilities machines and captive R&D including cost of IPRs, copyrights etc. It also includes cost of land and building not exceeding 2% of the total project capital expenditure. These incentives are available for investments made in a project within a period of 10 years from the date of approval."

So, that's in a nutshell. You can read more directly from deity website (deity: Dept of Electronics and IT), regarding the scheme details, forms, procedures etc, under the MSIPS heading. 

This is a step in the right direction, though a little late. These incentives are one of the enablers that would help. There are other factors such as power, infrastructure, labour laws, skill development through vocational training etc, that need special attention, if we are serious. However, a step in right direction needs to be lauded. Hence this blog.