Union Cabinet approves National electronics policy

Post completion of stakeholders’ consultation, the department of expenditure is being consulted on it currently.

The Union Cabinet on Tuesday approved the National Electronics Policy, media reports. The policy targets domestic production of electronics goods to the tune of $400 billion by 2025 against the current which is around $80 billion.

An important feature of the policy is the proposed interest subvention scheme, which suggests that an interest subsidy of 4% will be provided on loans of up to Rs 1,000 crore on plant and machinery. In case of a larger loan, subsidy will be limited to Rs 1,000 crore, reports FE Online.

The interest subvention scheme proposes to provide interest subsidy on the loan taken by the investor to offset the disability of financing faced by the manufacturers in India due to higher interest rate compared with the interest rate on loans in other competing countries.

Consultation with the department of expenditure is being done on the policy post the completion of stakeholders’ consultation.

Around 1 crore jobs are likely to be created under the new policy, Electronics and IT minister Ravi Shankar Prasad said.

Another scheme proposed under the policy is credit guarantee fund scheme, aimed at creating a fund to provide default guarantee to the banks up to 75% of the loan on plant and machinery for loans of up to Rs 100 crore.

This is expected to eliminate the need for small and new investors to provide third-party collateral currently currently demanded by banks for giving such loans. The scheme is modeled on the credit guarantee being provided by Sidbi for the SME sector.

A revised electronics manufacturing clusters is set to replace the existing scheme. According to the revised cluster scheme, support for creating infrastructure and common facilities will be provided in collaboration with state governments. There is also a proposal to create a sovereign patent fund to acquire IPs for chips and chip components. This would make available chips and chip components at very low cost to Indian entrepreneurs.

The government has also proposed to provide suitable direct tax benefits for setting up a new manufacturing unit or expansion of an existing unit.

The policy proposes to promote a forward looking and stable tax regime. This includes providing advance intimation to the industry to plan investments in the form of phased manufacturing programme in various segments of electronics, with a sunset clause.

It is noteworthy that production of mobile handsets, TVs and LED products (such as light bulbs) has gone up significantly in the recent past, primarily due to the initiatives of the government.

Further, electronics production has grown by 26.7% annually for the last four years. This has resulted in many investors showing interest for making large investment in the sector.

Source: FE Online

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