Removing disabilities on a few electronics products is a more workable idea: DeitY Secretary

India Electronics and Semiconductor Association urges government to provide a supportive ecosystem for the manufacturing of a set of 25 products, which accounts for 82 percent of the total electronics consumption

GN Bureau | January 16, 2014



To boost electronics system design and manufacturing, ESDM, the government can focus on a set of 25 high priority products, which accounts for 82 percent of the overall electronics consumption and develop a supportive ecosystem to set off the disabilities into the sector. In ESDM, the disability varies from 7 to 26 percent.

These were the findings of a report by Frost and Sullivan, based on a study commissioned by India electronics and semiconductor association (IESA). The high value products report was released along with another report on disabilities marring the ESDM sector— a study separately done by Ernst and Young—by the IESA this week.

J Satyanarayana, secretary, department of electronics and information technology (DEITY), delivering the keynote address at the release of the two reports, said, “Let us converge substantial part of efforts and resources from government and industry on 25 + 4 (products and components respectively) matrix.”

There is a need to relook at the initiatives undertaken by the government—the focus product scheme (FPS), modified special incentive package (MSIPS), marketing and promotion efforts, and clusters. We also need to evaluate whether these efforts are helping to boost manufacturing and innovation, he said.

“We need to use our limited resources on these 25 products to the maximum extent so that there is a resonance between the requirements and efforts made to meet requirements,” Satyanarayana said.

There is a need to accelerate the implementation of the national policy on electronics and other initiatives of the government fort boosting domestic electronics manufacturing, the secretary said.

Of the 25, the top five products – which includes mobile phones, flat panel display, notebooks and desktops—alone account for 60 percent of the overall electronics consumption. The four components that go into making of 25 products include power electronics, processor, LCD display, memory and printed circuit board.

According to the study, almost 69 percent of the consumption of these products is met through imports. The domestic production of rest of the 31 percent of the products consumed is declining in absence of proper interventions.

The DeitY secretary also said that it’s time to make a few changes in the approach towards development of ESDM. “Firstly, we need to change the licensing thinking to IP creation. How do we create IP around 25 products? How do we enhance the percentage of IP in bill of material of each product?” he stated.

The higher the slab of minimum local value addition under the preferential market access, PMA, policy, the better will be the development of local manufacturing. “Under PMA, the percentage of local value addition increases year by year. Unless we address need for IP creation the PMA will remain on paper,” he said.

Secondly, India should elevate from component design to system and product design development, he said.

There is also need to change India’s image as importer/assembler to a product manufacturing hub. “We need to focus on made in India.” Fourth is to focus on implementation, and putting things on ground.

Considering the reports and recommendations by IESA Satyanarayana put forth eight suggestions on the steps which need to be taken going ahead. The eight suggestions, according to Satyanarayana, are as follows.

Point 1: Need to build a layer of clusterisation based on these reports. Best geographical locations should be identified for adding another layer of clusters.

Point 2: IESA and DEITY should harmonise these reports and then select 15 to 20 points and then take them to the competent authorities in a cogent manner.

Point 3: The target under M-SIPS has been achieved, partly. There is a need for fine tunings in the policy.

Point 4: Resolve the inverted duty structure. It’s not feasible to address the duty structure for 1,000 categories of products. A more practical solution is to look at these 25 products and pick up the (inverted) duty elements and then go with a clear agenda to the competent authorities. This will be a more acceptable way of dealing with duty structure in the government.

Point 5: For value addition, innovation is a must. Hence the Rs 10,000 crore electronics development fund (EDF) for the purpose of research and development assumes great importance. If not whole, there is a need to take this forward even in bits and pieces.

Point 6: It is an imperative on the part of DEITY and other government agencies involved in processing of investment proposals to simplify their procedures. There is a need to have different timelines for approvals.

Point 7: There is a need to look at the Focus Product Scheme (FPS) to offset some of disabilities and incentivize high volume production so that exports become attractive.

Point 8: There is need to use limited resources on these 25 products to the maximum extent so that there is a resonance between the requirements and efforts made to meet requirements.

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