PLI Scheme misses out on supporting MSMEs: CIMEI

Nov 20: Recently Finance Minister Ms. Nirmala Sitharaman announced PLI Scheme to 10 key Sectors for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat on 11th NOV 2020 in Delhi.

In regards to that Confederation of Indian MSME in ESDM & IT (CIMEI) released a statement that PLI scheme need to be re-defined as a strategic plan without de-emphasizing the tactical incentives.

Mr. Sanjeev Keskar, President of CIMEI said that Government should look into benefitting the MSMEs of the Electronics Industry in 2 ways viz. Strategical i.e. enable towards the 100% value addition and force the PLI benefitted teams to source locally and Tactical i.e allocate at least 20% of the outlay allocate to 100% Indian MSME’s towards design, manufacture prototype and mass production to replace components imported by PLI benefitted schemes”

The PLI Schemes that affects the Electronics Industry are:

PrioritySectorsImplementing Ministry/DepartmentApproved financial outlay over a five-year period Rs. Crore
2.Electronic/Technology ProductsMinistry of Electronics and Information Technology5000
5.Telecom & Networking ProductsDepartment of Telecom12195
9.White Goods (ACs & LED)Department for Promotion of Industry and Internal Trade6238
8.High Efficiency Solar PV ModulesMinistry of New and Renewable Energy4500

In relation to these sections the Opinion of the industry are

Item No.2 Electronic/Technology Products

Government has allocated Rs.5000cr which will go on account of

  1. Semiconductor Fab
  2. Display Fab
  3. Laptop/ Notebooks
  4. Servers
  5. IoT Devices
  6. Specified Computer Hardware

Semiconductor fab calls for very high investment of more than $5Bn, rather than focusing on one category we should increase budget for earlier announced SPECS program (Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors) for developing local Electronic Component manufacturing ecosystem focusing on Passives/ Display/ LED / PCB / Relays / Camera module and other components which requires lower investment to become “Atmanirbhar”.

Item no 5. Telecom & Networking Products

It is a good decision that government want to encourage the Telecom infrastructure. Hence Government has allocated Rs. 12195Cr. We hope that this will encourage the MSME sector as the allocated funds will be spent by: 

  1. Core Transmission Equipment
  2. 4G/5G, Next Generation Radio Access Network and Wireless Equipment
  3. Access & Customer Premises Equipment (CPE), Internet of Things (IoT) Access Devices and Other Wireless Equipment
  4. Enterprise equipment: Switches, Router
  5. Please make existing PMA (Preferential Market Access) policy stronger so that MSME will also have participation in this segment.

Item no. 8 High Efficiency Solar PV Modules

This sector need huge investment and it looks that Rs.4500Cr will not be justified. Need more clarification of this category, already there is a scheme announced for “Solar Pumps” for agriculture in last budget can we link these 4500 crores to same program?

Item no. 9 White Goods (ACs & LED)

Government needs to explain what does it means by LED (LED lighting products of they are referring Television monitor. Technically Video screen (TV or Computer or Laptop Monitors can’t be LED. It has to be LCD. Light emitting Diode (LED) give results for LED Walls or Lighting. It looks obvious that the scheme will benefit to a particular large company who is into the business who is into manufacturing of LED(Lighting) and AC manufacturing will be benefitted the most.  

Mr. Jairaj Srinivas, Director General of CIMEI said “Though the schemes may receive large investment boost but, it should generate domestic employment also. The government has to seriously look into the schemes which encourages the manufacturing in electronic sector by MSME which also generate domestic employment”. He opined that the broad areas where government can focus should be:

  1. Linking the products manufactured by MSME with large manufacturer and if possible MNC can make them OEM.
  2. Government does huge procurement and the procurement policy must focus to encourage MSME. For which apart from the offering the price benefits, EMD exemption and other existing benefits, the RFP for tender document must be written by an independent agency who cannot be influenced by MNC.
  3. Custom duty for the import of components and finished goods must be at par with each other.
  4. Government must re-visit the value-addition clause in import policy. Today many importers are importing finished product, ready to use product and importers do not add much value, but they claim benefits of value-addition and hence they are able to sell the imported finished products. Also, this reduces the labour cost, where as MSME is a labour-oriented industry. 
  5. Electronics and electronic accessories are also a major industry because India is home to the third largest pool of scientists and technicians in the world. Skilled manpower, strong design, and R&D capabilities are advanced and abundant. The workforce is not just skilled, but cost-effective as well. Government must make the policies considering these factors.
  6. The engineering design skills are being exploited by many companies (MNC’s) for value add outside India. The root cause of this is by hijacking the top skills by incremental increase in salary of the best engineers in India. Unfortunately, they end up working for non-core, replaceable jobs. The only way to bring back this talent to India specific programs are,
  • by 20 to 30% standard deduction in Income-tax for the highly skilled engineers working for MSMEs.
  • by direct passing on benefits to the concerned industry that provides the import substitute critical components or for those earning by exporting at least to the extent of import cess (a fund that can be generated by the import cess collected).
  • A statutory advisory body should be constituted by government of India considerable representation by MSME representatives to be part of govt. decision, policy making and tendering process.

About Confederation of Indian MSME in ESDM & IT (CIMEI)

Confederation of Indian MSME in ESDM & IT (CIMEI) represents echo the thought process of the MSME leaders in the country and strive to collaborate with Government of India in policy making and effective implementation of the schemes to the benefit of MSMEs in turn steer the way to Atmanirbhar Bharat. More information about CIMEI could be found at http://www.cimei.in