No New Semiconductor Subsidy Scheme Expected in Budget 2024

The Indian government has indicated that it is unlikely to launch a second round of semiconductor subsidies this year. Despite committing a significant portion of the initial ₹76,000 crore ($10 billion) scheme to four major projects, the Ministry of Electronics and Information Technology (MeitY) is adopting a cautious approach before seeking additional funds.

Focus on Disbursement and Project Grounding

The government is prioritizing the disbursement of funds to the projects already approved under the first scheme. Companies like Micron, Tata Electronics, and others need to initiate construction and expenditure before receiving further financial support. Ministry of Electronics and Information Technology (MeitY) believes that demonstrating effective utilization of the initial funds is crucial before requesting additional allocations from the finance ministry.

Micron, Tata Electronics, and Others in the Spotlight

Micron's $2.75 billion chip packaging plant in Gujarat was the first project to receive approval under the scheme. Tata Electronics, in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corp (PSMC), is also setting up a fabrication plant in Gujarat. Additionally, Tata Semiconductor Assembly and Test Pvt Ltd is establishing a chip assembly and testing unit in Assam, while CG Power and Japan's Renesas are collaborating on a chip packaging plant in Gujarat. These four projects are estimated to consume around ₹59,000 crore from the total ₹76,000 crore allocated.

Second semiconductor subsidy Scheme Postponed, Focus on Electronics Components

While the second semiconductor subsidy scheme is unlikely to materialize this year, the government is shifting its attention to promoting electronics component manufacturing. MeitY plans to introduce an incentive scheme in August-September with an outlay of ₹30,000-40,000 crore to support land acquisition for setting up factories in specific component categories. This move aims to increase local value addition in the electronics sector and reduce reliance on imports.

India's Electronics Manufacturing Goals

The government has set an ambitious target of achieving $300 billion in electronics production revenue by 2025-26. The electronics components incentive scheme is a crucial step towards this goal. The India Cellular & Electronics Association (ICEA) has urged the government for a substantial outlay of ₹30,000-35,000 crore to support the growing demand for electronic components.

Challenges and Considerations

The decision to delay the second semiconductor subsidy scheme highlights the government's cautious approach to fiscal management. With competing demands for subsidies in sectors like agriculture, medium and small enterprises, and large-scale manufacturing, the government needs to carefully balance its resources.

Conclusion

India's semiconductor ambitions are facing a temporary setback as the government prioritizes the disbursement of funds under the initial subsidy scheme. While the delay in launching a second round of subsidies might dampen short-term expectations, the government's focus on ensuring effective utilization of existing funds is crucial for the long-term success of the semiconductor ecosystem.

The parallel initiative to promote electronics component manufacturing underscores India's commitment to building a robust domestic electronics industry. By increasing local value addition and reducing reliance on imports, the government aims to create a more self-reliant and competitive electronics ecosystem.

However, the challenge of balancing competing demands for subsidies across various sectors remains a significant hurdle. The government will need to carefully allocate resources to ensure the sustained growth of the semiconductor and electronics industries while addressing other pressing economic priorities.

Ultimately, the realization of India's semiconductor and electronics vision hinges on the successful implementation of these policies and the active participation of industry stakeholders.