Union Ministry of Electronics and Information Technology (MEITY) has issued draft ‘National Policy on Electronics 2018’ (NPE 2018) for Electronics System Design and Manufacturing (ESDM) Sector of India. It sets ambitious target of creating $400 billion electronics manufacturing industry by 2025, with mobile phone devices segment accounting for threefourths of production.

Draft National Policy on Electronics (NPE)

Draft NPE aims to promote domestic manufacturing in entire value-chain of ESDM sector for spur economic development in the country. It also aims to double the target of mobile phone production from 500 million units in 2019 to 1 billion by 2025 to meet objective.

It replaces existing incentive schemes like Modified Special Incentive Package Scheme (M-SIPS), with schemes that are easier to implement such as interest subsidy and credit default guarantee etc. It also takes into consideration interest subsidy and credit default guarantee in order to encourage new units and in expansion of existing units in electronics manufacturing sector. The set target of $400 billion turnover under it, includes targeted production of 1 billion mobile handsets by 2025, valued at $190 billion (approximately Rs. 13 lakh crore) and also 600 million mobile handsets valued at $110 billion (approximately Rs. 7 lakh crore) for export.

It also proposes to push development of core competencies in all sub-sectors of electronics including electronic components and semiconductors, automotive electronics, defence electronics, industrial electronics, strategic electronics etc. It also proposes to set up 20 greenfield and three brownfield electronic manufacturing cluster projects have been sanctioned with project outlay of Rs 3,898 crore, including Rs 1,577 crore from Central Government. It proposes suitable direct tax benefits, including interalia investment-linked deduction under Income Tax (IT) Act for electronics manufacturing sector, for setting up of new manufacturing unit or expansion of an existing unit.

The proposal includes increasing tax benefits on expenditure incurred on R&D, enhancing rate of duty drawback for electronics sector, reimbursement of state levies and other levies for which input tax credit is not available, allowing duty free import of secondhand capital goods for electronics hardware manufacturing etc. It also proposes cess on select electronic goods resources to promote certain critical sub-sectors of electronic manufacturing such as semiconductor wafer fabrication and display fabrication units.

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