Monday, July 09, 2012:
NEW DELHI, INDIA: ELCINA Electronic Industries Association of India heartily welcomes the formal approval of the Scheme of Electronic Manufacturing Clusters by the Union Cabinet. The Scheme is designed to provide world-class infrastructure for attracting investments in the Electronic Systems Design and Manufacturing Sector by granting financial support for developing modern common infrastructure to facilitate high value added electronics manufacturing.
ELCINA is indeed happy at the formal announcement of the Policy since the Cluster idea was first mooted by the Association almost three years ago. ELCINA formulated and developed a structure for Model Electronics Manufacturing Clusters in late 2009 based on a detailed analysis which it conducted with inputs from its senior members and data collected from observing clusters during overseas member delegation visits.
ELCINA estimated that there was a disability cost of 8-12 per cent suffered by manufacturing locally caused by high energy, finance and logistics costs depending on the degree of value addition. The irony was that higher the value addition, higher was the disability cost. Over 60 per cent of this cost, amounting to 5-8 per cent, could be overcome through establishing manufacturing in Clusters which provided a supportive ec-system.
ELCINA's proposal, which was included in the Draft National Electronics Policy 2011, has fructified at long last, had the full backing of the Department of Electronics & Information Technology (DeitY) and while providing a supportive eco-system, it will lead to investment flows, domestic and foreign, and accelerate growth in electronics manufacturing where India faces a huge trade deficit.
As has been widely publicized, the projected demand for electronic equipment, components, assemblies and design services will approach $400 billion by 2020 compared to about $75 billion at present. Out of this $75 billion, there is a deficit of $40 billion, which is serviced through imports. This figure is expected to exceed the Oil imports bill of the country before 2020 which we can ill afford.
The Cluster Scheme will offer financial support for the development of Electronics Manufacturing Clusters (EMCs) as these EMCs would aid the growth of the Electronics Systems Design and Manufacturing sector, help development of entrepreneurial ecosystem, drive innovation and catalyze the economic growth of the region by increasing employment opportunities and add substantially to the Exchequer. The policy estimates that there is a need for 200 such Clusters in the country.
The EMCs scheme would support setting up of Greenfield (new) and Brownfield (existing) Clusters with a number of features, including financial support to an Special Purpose Vehicle (SPV) which may be promoted by private companies, industry associations, financial institutions, R&D institutions, State or Local governments or their agencies and units within the EMC. Thus it would be a user driven model
The financial assistance to the SPV shall be in the form of grant-in-aid restricted to 50% of the project cost subject to a ceiling of Rs. 50 crore for every 100 acres of land while for Brownfield EMCs the assistance will be restricted to 75% of the project cost also subject to a ceiling of Rs. 50 crore.
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 reasons such as increased supply chain responsiveness, consolidation of suppliers, decreased time-to-market, superior access to talent and lower logistics costs.
T. Vasu, director Tandon Group and ELCINA president, commented: "We have taken the lead in developing the first two Clusters in the country, one in the NCR Region in Bhiwadi (Rajasthan) and one in Ananthpur district (Andhra Pradesh) near Bangalore.
"Member groups of 15-20 companies have been constituted for these two Model Clusters who have confirmed their interest in establishing their manufacturing facilities and we estimate that work will start on these two prestigious projects within 6-8 months. This will be a matter of great pride for all stakeholders, especially for ELCINA and will change the landscape of the Electronics Manufacturing Industry for all time to come."
Vinod Sharma, past president, who also contributed to the policy concept and structure, expressed immense delight at the approval of the policy and said: "This policy, in conjunction with the Modified Special Incentive Scheme (SIPS-II) which is also expected very soon, will play a major role in attracting investments in electronics manufacturing as it will reduce disabilities faced by the industry substantially. This Policy was the most urgent and vital need of the industry."
BS Sethia, past president, ELCINA and co-chairman Policy Committee, was thrilled about this development and said: "This policy, if implemented in letter and spirit, would have a very significant impact on the economy generating huge employment as most of these units in EMCs would be SMEs, which are labour intensive in nature. They would do high value added manufacturing of the entire spectrum of electronic components, parts, assemblies as well as complete equipment resulting in reduced dependence on imports and a stronger electronics value chain."
Rajoo Goel, secretary general, commented: "ELCINA looked forward to supporting and facilitating setting of these Clusters and atleast 10 more similar ones across the country in the next three to four years. Each Cluster with 35-40 units would employ anywhere between 15,000-18,000 direct workers and generate sales turnover of about Rs 2,500 crores. These 10 Clusters alone could generate an output of Rs 25,000 crores."
ELCINA offered sincere thanks to the Department of Electronics & IT for there unstinted support over the last two years in making this policy a reality and looked forward to the complete Policy being approved in due course including SIPS-II, Creation of the R&D/Innovation Fund, National Electronics Mission and finally, the Semiconductor Fab.