After Apple PLI, plug & play model in works for components

To kick-start large-scale domestic manufacturing of electronic components, the government is in the process of working out the contours of a new incentive scheme, which will be on the lines of plug and play model.

Officials said that the scheme which will be unveiled once a new government assumes office, will be different from production-linked incentive schemes as well as the subsidy scheme for semiconductors.

The aim of the plug and play model is to enable domestic production of printed circuit boards, electronic components such as resistors, diodes, camera modules, lens, metallics, etc. Since these products do not offer large margin, it will be difficult to make manufactures relocate their base from Taiwan or China with schemes like PLI, hence the need for a new model, officials said.

Under the plug and play model, the government will identify land, acquire it, and build factories. Global companies manufacturing such products can then install machinery and use the facilities to roll out the identified items. “The margin in such products is around 3-4% but the volumes are huge,” officials said.

To get started, the government is targeting to have at least five large plants to make components in such industry clusters.

Officials said the investments made by the government in acquiring land and building factories, will automatically get recouped through goods and services taxes. Further, the import bill on electronic components will come down thus reducing the current account deficit.

For instance, the government has set big targets for increasing the overall electronics exports from the country. However, as exports will go up, imports will also go up simply because currently, the value addition which happens in the country is limited, and a significant portion is imported, assembled and then re-exported or used for domestic consumption.

While PLI schemes for smartphones, consumer electronics, IT and telecom will yield results in terms of domestic manufacturing as well as increasing exports, unless there’s a similar scheme for electronics components, trade deficit will continue to widen.

Countries like China, Thailand, and Vietnam, which are competing economies for India as far as electronics trade is concerned and where most of the component manufacturers are located have trade surplus.

Officials said that the only way to check trade deficit in electronics is to increase domestic value addition and that can happen when more and more components start getting manufactured domestically. The plug and play model will address this missing link. Officials said such a model will also create more jobs, both direct and indirect.

Countries like China and Vietnam have built up their huge ecosystem for electronics component manufacturing through plug and play model.

The domestic electronics manufacturing was at $102 billion in FY23 and is likely to have risen to around $115 billion in FY24. The government has set a target of achieving $300 billion by 2025-26. In FY24, India’s electronics goods exports jumped 23.6% to $29.12 billion, even as the country’s total exports contracted by 3%.