The Cabinet on Thursday approved the Modified Special Incentive Package Scheme under which the government will provide up to Rs 10,000 crore in benefits to the industry over the next five years for promoting production of electronics products and components in India.

"The policy is expected to create an indigenous manufacturing eco-system for electronics in the country. It will foster the manufacturing of indigenously designed and manufactured chips creating a more cyber secure ecosystem in the country," said an official statement.

Under the scheme, government will provide incentives up to Rs 10,000 crores during the 12th Five Year Plan period (2012-17).

"The projects with incentives of Rs 10,000 crore have potential to create employment for nearly 0.5 million persons," the statement said.

The scheme will provide subsidy for investments in capital expenditure with a limit of 20 per cent for investments in Special Economic Zone and 25 per cent in non-SEZs.

Under MSIPS, investors will get reimbursement of Countervailing Duties and excise for capital equipment for units set-up outside SEZ.

"For high technology and high capital investment units, like fabs (units for making electronic chips), reimbursement of central taxes and duties is also provided." it added

The incentives will be given to investments made in a project within a period of 10 years from the date of its approval and is open for three years.

Government has included 29 categories in Electronic System Design and Manufacturing (ESDM) sector that can avail benefit of this MSIPS.

This includes telecom, IT hardware, consumer electronics, medical electronics, solar photo-voltaic, LEDs, LCDs, strategic electronics, avionics, industrial electronics, nano- electronics, semiconductor chips, other electronic components, contract manufacturing.

The scheme has included units starting from raw materials assembly, testing, packaging and accessories which will boost ecosystem for electronics manufacturing in the country and reduce dependence on imports.

To woo foreign investors, MSIPS will also provide incentives for relocation of units from abroad.