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Special scheme on cards to promote component manufacturing

Govt looking beyond mobile phones manufacturing, seeks inputs for MSIPS-like incentive package. MSIP scheme provides multiple incentives tax holiday for certain years, capital subsidy and reimbursement of central taxes and duties.

, ET Bureau|
Oct 20, 2019, 11.25 AM IST
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BCCL
manufacturing
M-SIPS scheme was floated to encourage electronics manufacturing between 2012 and 2018.
New Delhi: The government plans additional sops like the Modified Special Incentive Package Scheme (MSIPS) to promote a component manufacturing ecosystem in the country that will go beyond making mobile phones.

In a recent meeting with mobile phone and electronics manufacturing companies and multiple industry bodies, the government has sought inputs to either create an over-arching policy for giving out the incentives or focusing on some 20-odd components and providing support so that an ecosystem could be built around them.

“The government has sought inputs for solutions for the MSIP-like scheme, which could be other than interest subvention and credit default guarantee,” said an industry executive who attended the meeting.

“The implementation of any MSIP-like scheme should be outside the scope of MeitY (ministry of electronics and information technology) and by an outside department/arm since ministry’s role is that of a policy maker only,” said a second executive.

M-SIPS, which was floated to encourage electronics manufacturing, ran from 2012 to 2018. It promised multiple incentives for 10 years, including a capital subsidy of 20% in special economic zones (SEZs) and 25% in non-SEZs, and reimbursements of countervailing duty or excise on capital equipment for non-SEZ units. For some high-capital projects, it also offered reimbursement of central taxes and duties.

The incentives were available for 29 electronic verticals across the manufacturing value chain. The period of benefits was reduced to 5 years from 10 years after it was recalled.

The Merchandise Export from India Scheme (MEIS) provides duty credit scrip of 4% on exports. It will be replaced by the Remission of Duties or Taxes on Export Products (RoDTEP) scheme from January 1, 2020, which was announced by the finance minister last month to boost exports.

Officials said budgetary allocation for all MEIS or its replacement has been increased to Rs 50,000 crore.

A section of the industry has batted for continuing MSIPS, while another section pushed for a rate cut in goods and services tax (GST) for components manufactured in India.

“MSIPS should be continued since it has attracted large investment proposals. But MEIS and MSIPS both are essential to increase the scale of production. Increased volumes would attract the supply chain/component manufacturers to India,” another senior industry executive said, asking not to be named, since the discussion was ongoing. “MSIPS should be opened to both handset and components manufacturers. Increase in the production scale should be our focus area to increase value addition.”

Industry executives said the government will hold a series of meetings before it brings out any solutions or schemes to replace the existing ones.

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