The scheme aims to develop about 200 clusters across the country, and provide employment to around 28 million people
The Electronics Manufacturing Cluster (EMC) scheme, a part of the National Policy on Electronics (NPE), was approved by the Union Cabinet in July 2012. The electronics industry can benefit immensely from this scheme as it will support the setting up of both Greenfield (new) and Brownfield (existing) clusters, and provide world class infrastructure in order to attract investments in the electronics industry. It will also help to develop an entrepreneurial ecosystem, drive innovation and catalyse the economic growth of the region by increasing employment opportunities and tax revenues. The scheme aims to provide employment to about 28 million people at various levels.
The government aims to develop about 200 clusters across the country, which will include the full ecosystem for manufacturing electronic products. The infrastructure will include design houses, training centres, manufacturing facilities, etc. Guidelines for this policy are expected by the end of November 2012.
How can the industry go about it
Companies that have similar or the same operation lines can form a cluster and share the advantages of the common facilities available in the cluster. As the scheme supports Greenfield and Brownfield clusters, both new and existing players can approach the Department of Electronics and Information Technology (DeitY) directly or through an association to form a cluster. A cluster will comprise of both a processing area—where the manufacturing facilities, along with associated logistics and other services will be located—and a non-processing area, which will include hostels, commercial, social and institutional infrastructure.
Shares BS Sethia, director, Elin Electronics, “If this scheme is implemented in full, in both letter and spirit, it will have a very significant impact on the economy of the country, generating huge employment opportunities as most units in the clusters would be SMEs, which are labour intensive by nature. They will do high value added manufacturing of the entire spectrum of electronic components, parts, assemblies as well as complete equipment. This will result in a reduced dependence on imports and a stronger electronics value chain.”
A special purpose vehicle (SPV) will be formed that will operate, develop and manage the cluster, which will be a legal entity duly registered for this purpose. Financial assistance to SPV will be in the form of a ‘grant in aid’ only.
The EMC scheme will be open for applications for the next five years. It does not distinguish between Indian and foreign investors.
Benefits of the scheme
Companies in the clusters will not be seen in isolation but in relation to each other—taking into consideration both forward and backward linkages in the value chain. Apart from employment generation, this scheme can boost local manufacturing to a great extent. Component manufacturing can also start off in these clusters.
For Greenfield clusters, assistance will be up to 50 per cent of the project cost, subject to a ceiling of Rs 500 million for every 100 acres of land. For Brownfield clusters the assistance will be restricted to 75 per cent of the project cost, subject to a ceiling of Rs 500 million.
Implementation
The scheme has garnered a good response from the industry. State governments have proactively come forward and offered land for setting up EMCs. This includes land in Hyderabad, Vishakhapatnam, Bengaluru, Chandigarh, Bhiwadi, Jaipur and Kochi. Several owners of unutilised SEZs have enquired about the possibility of converting these SEZs into EMCs.
The Electronic Industries Association of India (ELCINA) is already promoting two clusters at Bhiwadi (Rajasthan) and Ananthpur (Andhra Pradesh), and 20 companies have already confirmed their interest in setting up units.
Said Rajoo Goel, secretary general, ELCINA, “As soon as the government allocates land for these clusters, we will start work on these two projects.”
As estimated by ELCINA, the scheme confirms that a well developed cluster can give a unit located in it a cost advantage of 5-8 per cent because of various factors such as increased supply chain responsiveness, consolidation of suppliers, decreased time-to-market, superior access to talent and lower logistics costs.
By Richa Chakravarty
