Around Rs 21,936.90 crore has been provided to the MeitY for its expenditure, which is a 52 percent boost counting the last year's budget.
Post Lok Sabha elections, Finance Minister Nirmala Sitharaman presented her seventh union budget 2024-25, which is committed to the four pillars of the development agenda: ‘Garib’ (Poor), ‘Mahilayen’ (Women), ‘Yuva’ (Youth) and ‘Annadata’ (Farmer). The current budget placed greater importance on boosting self-sufficiency, or Aatmanirbharta via strategic initiatives with a key focus on developing India’s electronics and semiconductor manufacturing ecosystem and taking India’s digital ecosystem to a greater height. The core focus of the budget is PM Modi’s packaged incentives and initiatives that are designed to craft immense opportunities for 4 crore youths in the coming five years. With a disbursement of Rs 2 lakh crore, the budget will focus on employment generation, skilling requirements, and education.
For the past several years, the government has been undertaking various initiatives to grow the nation’s electronics and semiconductor industry. Various schemes and policies have been unleashed to help the country to move ahead in the global value chain. This year at the budget session, the finance minister has announced a total of Rs 6,903 crore for the semiconductor ecosystem. An additional outlay isn’t announced because in the last year’s budget, a sum of Rs 3,000 crore has been allocated that was later revised to Rs 1500 crore. Around Rs21,936.90 crore has been provided to the Ministry of Electronics and Information Technology (MeitY) for its expenditure. Last year, the budget allocated to the ministry was around Rs 14,421.25 crore. Counting both the outlay, the MeitY received around 52 percent boost in this year's budget.
In an effort to bolster the ESDM sector in the nation, the scheme for promotion of the manufacturing of electronic components and semiconductors (SPECS) was unleashed in 2020. The scheme offers an incentive of 25 percent on total expenditure for specific electronic items. Under this scheme, an investment of Rs 12,638 crore and committed incentives of Rs1,758 crore have been approved by the government until March 2024.
Industry bodies such as Electronics Industries Association of India (ELCINA) acknowledge the positive steps announced in the Union Budget 2024-25 presented by Union Finance Minister Nirmala Sitharaman, which includes essential measures impacting the electronics sector. The budget introduces significant changes in Customs Duties and extends exemptions that will support value-added manufacturing within the industry.
The budget document further revealed that the government has decided to provide Rs 4203 crore for a couple of ventures for setting up assembly units, discrete and compound semiconductor manufacturing. Counting the total expense allocation proposed in the two year’s budget, Rs 1,500 crore is offered for electronic chip plants in the country, Rs 100 crore for electronic displays and Rs 900 crore for the modernisation of the Semi-Conductor Laboratory in Mohali. In fact, it has also declared to alter the First Schedule to the Customs Tariff Act, 1975, from October 1 in an effort to create new taxation slabs for certain products utilized in Indian semiconductor machines, e-bicycles, and printer cartridges.
What The Industry Leaders Think About the Union Budget 2024-25:
Varun Manwani, Director, Sahasra Group
Sahasra Semiconductors welcomes the budget and thanks the finance minister for the bold steps taken for supporting the Semiconductor industry. The reduction is BCD on gold to 6 percent is very welcome! Also, the reduction in other key raw materials and inputs that go into the Semiconductor industry will boost further investments. The support provided for education, new skilling and up-skilling will help in job creation and reduce the burden on industries as well as empower people.
Ashok Mehta, Founder and Chairman, Suchi Semicon
The union budget 2024 is industry friendly the finance minister declared rs 6900 crore to support the semiconductor industry our Prime Minister Mr. Narendra Modi is having very good vision for industrial growth and how to protect local industries also govt already give duty free import for capital goods related to semiconductor industries this budget is giving big boost to industry we all are very much happy with this budget.
A. Gururaj, Managing Director, Optiemus Electronics Ltd
We welcome the initiatives announced in the Union Budget. The significant emphasis on manufacturing is heartwarming and much needed for the growth of the economy. With the substantial expansion of the electronics manufacturing industry, the demand for a skilled workforce has become paramount. The announcement of various skilling initiatives and the scheme to incentivize additional employment in the manufacturing sector, particularly for first-time employees, will provide essential support to industries reliant on skilled workforce, especially in electronics. Furthermore, the proposal to reduce the Basic Customs Duty on mobile phones, mobile PCBA, and mobile chargers to 15% is a positive step. The measures laid out to support the MSME industries are particularly welcome to create a much-needed supplier base for electronics within India. These measures collectively send out a strong message on the manufacturing sector and related ecosystem in India.
Rajoo Goel, Secretary General, ELCINA
I express my appreciation on behalf of the industry for the Union Budget 2024-25, noting its positive changes for the electronics sector. We believe the above measures support and continue the initiatives taken in the last few years to promote value added manufacturing. However, ELCINA and the industry at large are awaiting the announcement of a robust Scheme for promotion of electronic components, parts and modules manufacturing. A detailed representation for the same with analysis of the segment-wise current demand and supply scenario has been presented to MeitY. We urge the Government to take an urgent decision and provide much needed support to this value-added manufacturing segment of the ESDM industry.
Pankaj Mohindroo, Chairman, ICEA
The concessions are provided to the extent of nil from existing BCD slabs of 10 to 2.5 per cent, depending on the different critical metals. We also welcome the rationalization of tariffs on Silicon Quartz and silicon Dioxide from 5/7.5 per cent to 2.5 per cent. This is a crucial step to propel the establishment of a strong silicon and power semiconductor wafer production ecosystem in the country.
Ashok Chandak, President, IESA
IESA welcomes the budget's strong focus on manufacturing, job creation, MSME support, women's employment and rationalization of customs duty. The initiatives mentioned are expected to act as catalysts for creating a new workforce in the thriving semiconductor and electronics sector which is facing an acute shortage of relevant skills. The Union Budget 2024 appears promising for the government's commitment to making India a global powerhouse for electronics production.
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Key Budget Announcements: 1. Reduction in Customs Duties:
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There is a slump in basic customs duty (BCD) from 20 percent to 15 percent on certain electronic products such as mobile phones, mobile printed circuit board assembly (PCBA), and mobile chargers. While announcing the incentives and the tariff lines, the Finance Minister Sitharaman told the parliament, “With a three-fold increase in domestic production and almost a 100- fold jump in exports of mobile phones in the last six years, the Indian mobile industry has matured. In the interest of consumers, I now propose to reduce the basic customs duty (BCD) on mobile phone, mobile PCBA, and mobile chargers to 15 percent.”
Muralikrishnan B, President of Xiaomi India told the media, "At Xiaomi India, we have been manufacturing nearly 100% of our smartphones locally with a strong emphasis on sourcing components like PCBA, charging cables, camera modules, and mechanics, among others. The budget announcement will help further strengthen the domestic electronics manufacturing ecosystem. The proposal for a comprehensive review of the tariff rate structure is another positive step that will further strengthen the industry."
Electric Vehicle
In the current union budget, there was no specific announcement for EVs or FAME 3. Prior to the budget, in March 2024, the Electric Mobility Promotion Scheme (EMPS) was announced with an outlay of Rs 500 crore for a period of four months. The EMPS targeted to boost the growth of the two and three-wheeler segment. An additional outlay of Rs 3,500 crore for the PLI Scheme for Automobiles and Auto Components in this year According to Clean Mobility Shift, in 2023-24, the budget estimate was Rs 604 crore while the Revised Estimates turned up to be Rs 483.77 crore.
Although no outlay has been announced, FM Sitharaman assured to set-up a Critical Mineral Mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. Sitharaman added, “Its mandate will include technology development, skilled workforce, extended producer responsibility framework, and a suitable financing mechanism."
Critical minerals like lithium, copper, cobalt and rare earth elements are extremely essential for sectors like nuclear energy, renewable energy, space, defense, telecommunications, and high-tech electronics. “I propose to fully exempt customs duties on 25 critical minerals and reduce BCD on two of them. This will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors." Sitharaman further added.
How The Budget Proves Promising for The Electronics Industry
Industry body ELCINA appreciates the Government's efforts to address some of the pressing issues faced by the electronics sector. The reductions in customs duties and extension of exemptions are positive steps towards supporting the industry’s growth and competitiveness. However, ELCINA emphasizes the need for a comprehensive scheme dedicated to promoting the manufacturing of electronic components, parts, and modules. Components and key Modules used in electronic equipment have been a major stumbling block for the development of a sustainable ESDM sector in India. The industry bodies believe that till such time that this shortcoming is not addressed, the country will always be dependent on overseas suppliers and will struggle to take a leadership position in the global industry. Urgent measures in this area are required.
