Saturday, June 6, 2020

NPE2019 - a critical stepping stone to "आत्मनिर्भर भारत"

The "National Policy on Electronics 2019" or "NPE2019" was passed recently by the cabinet. This is a landmark decision that has the potential to have far-reaching impact on India's global competitiveness. A more knowledgeable person than me can shed much more light on how critical indigenous know-how is when it comes to electronic system design and manufacturing. However, suffice it to say that it's the equivalent of being a member of the nuclear club. Currently a large portion of India's needs in various industries when it comes to electronic equipment is being met through imports. Not a healthy situation to be in. NPE2019 aims to tackle this large area of opportunity. Self-reliance in the ESDM sector is not just good for the balance sheet but also of strategic importance for other industries as well and for the economy in general. 

The official gazette notification on NPE2019 makes for VERY interesting reading and can be found on the Meity website (or click here). The first section sets out the context of why ESDM sector is of importance. Then it lays out the vision, mission, objectives and strategies that Meity is employing to meet aforementioned objectives/mission/vision. NPE2019 has some key strategies. Amonst other things, these involve creating an ecosystem, mandating a quality framework and funds for R&D. It's a well thought out document and very much worth a read. 

Some of the most important take-aways from NPE2019 are - 
  1. Creation of EMCs (the equivalent of STPI for software and IT services). This is done through a variety of provisions - 
    • Focus of EMC creation to be hitherto underdeveloped/undeveloped areas
    • Financial assistance financial assistance to the tune of 50% of the project cost subject to a ceiling of Rs. 70 crore for every 100 acres of land.
    • Phased release of funds depending on project progress. 
    • Defined provision of vital and essential services such as internal roads, storm water drains, e-waste management, safety services etc. 
  2. PLIs (production-linked incentives) for Large Scale Electronics Manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including electronic components and semiconductor packaging. The government shall extend an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India for a period of 5 years.
  3. SPECS (Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors). As of today, the main impediment in the way of attracting investment for manufacturing electronic components are “Nil” Basic Customs Duty (BCD) on imports (mandated by WTO) and high cost of capital to set up units locally; not to mention lack of infratructure, lack of relevant know-how, lack of technology, high logistics cost etc. SPECS involves an incentive of 25% of capital expenditure for all manufacturing set up under the SPECS-approved list (ranges from LED chips to camera modules to RFID chips to HDMI cables). 
  4. Creation of CoEs for innovation. 
  5. Creation of a sovereign patent fund. This will be a state-led investment fund that shall acquire Intellectual Property (IP) assets important to national economic objectives. The SPF will provide high-level IP support and expertise to Indian enterprises, which themselves may be unable to afford it. Setting up of an SPF to acquire IP assets would support the MSME players largely by making these technologies available at a low cost

While belated; NPE2019 is a critical stepping stone to "आत्मनिर्भर भारत". However, it needs to also be backed by a robust quality framework to ensure that products that go from India to the global marketplace meet expectations and aren't substandard. It is critical in ensuring the success of this long-term vision. While industry reaction has been positive, the framework is but the first step. It shall all boil down to how well private players take up the mantle and deliver on quality along-with cost effectiveness. No doubt it shall be an uphill battle considering India's affinity for quick fixes and "jugaad. The next few years will be very interesting - make or break for India! 

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