Govt Plans New Incentive Package For Electronics.

BANGALORE: The government is considering a new special incentive package for the electronics industry that it hopes will make India less dependent on imports of electronic components, systems and products.

Ajay Kumar, joint secretary in the Union information technology department, said on Monday that a committee under HCL Infosystems CEO Ajai Chowdhry had submitted recommendations.

The new package is an attempt to improve on the incentive package the government introduced under its semiconductor policy of 2007, which is seen to have largely failed in its broader objectives. The 2007 package had offered 20-25% subsidies to large investments of Rs 1,000 crore to Rs 2,500 crore in semiconductor fab units and eco-system units.

But the only investments it attracted were from the solar photovoltaic segment. Some 11 such projects achieved financial closure in the three-year window that was provided under the scheme, and these are currently being appraised by the government for provision of the subsidy.

Kumar, who was speaking at the India Semiconductor Association (ISA)'s Vision Summit, admitted that the response to the scheme was "lukewarm". He said he could not disclose the recommendations of the Chowdhry committee, but said that the focus would no longer be on large projects, rather, it would be on all segments along the value chain of electronic systems. "Chips, chip components, accessories, assembly, testing would all be sought to be stimulated. The idea is to provide financial incentives to all units in the value chain," he said.

The ISA and the electronics industry has long been pointing out that the gap between India's demand for electronic products and its domestic production could become dangerously wide in the years to come, given the sharp rise in demand that is expected. According to the government's own estimate, India's demand for electronic hardware that was $45 billion in 2009 would rise to $400 billion by 2020. But at current growth rates, domestic production will be just about a quarter of the demand by 2020. China and Taiwan are some of the big manufacturers from whom India imports hardware.

Kumar said global companies were looking for alternatives to China and therefore this was a good time to build on India's knowledge strength in the space and move on to manufacturing. India has become very strong in areas like chip design services, and is now even doing complete chips. Bobby Mitra, chairman of ISA and MD of semiconductor major Texas Instruments, said the opportunity for electronic systems innovation in India was huge, especially in industrial applications, energy efficiency, healthcare and education.

India has a clear strength in human resources for this space compared to rivals like Vietnam and Thailand, both in terms of large-scale availability of engineers and the cost of those engineers. But it suffers from higher energy and transport costs, and from poorer infrastructure. The government subsidy is expected to compensate for these negatives.

Source : timesofindia.indiatimes.com