M-SIPS incentive needs to be raised to 30%: IAMAI

To emerge as a global mobile component manufacturing hub, India needs to raise the Modified Special Incentive Package Scheme, or M-SIPS, to 30 per cent from 25 per cent of capital expenditure to offset loss of revenue, said a report from industry body Internet and Mobile Association of India (IAMAI).

This year provides a unique window of opportunity for India to formulate and introduce an attractive set of policies to emerge as a global mobile component manufacturing hub, said the report titled "Modified Special Incentive Package Scheme (M-SIPS) 2.0".

This will enable India to have a sizeable share of the global mobile handset market which is expected to be $648 billion by 2025.

The opportunity cost of starting component manufacturing facility in India, translates into a loss of revenue of around 4 to 9 months, working out to a capex spend of 4-5 per cent, according to the research.

To offset this revenue loss, the M-SIPS incentive needs to be raised, IAMAI recommended.

While M-SIPS 1.0 successfully managed to attract foreign investments into mobile manufacturing, albeit into the low value additive processes, the report talks about the much needed new version of the Modified Special Incentive Package Scheme, M-SIPS 2.0.

It highlights the need for a paradigm shift to increase the Indian ownership of the value chain by strategically targeting the highest value-additive portions of components manufacturing, inviting high technology-driven investment to India.

India needs to focus on the components which have the potential of high-value addition, can be commonly used across the electronics manufacturing sector and are the lowest hanging fruit in the current mobile manufacturing eco-system.

According to the research by IAMAI, manufacturing of PCB, Plastic Mouldings and Display modules fit the three key factors.

IAMAI also recommended that the Ministry of Electronics and Information Technology (MeitY) should develop and launch a special purpose vehicle under its aegis to quickly evaluate, assess and disburse the special incentive scheme M-SIPS 2.0.

In the medium term, India needs to work on developing its transport and logistics infrastructure, introduce labour reforms, provide focused skill training and above all streamline its processes to ensure enhanced ease of doing business, said the industry body.

( With inputs from IANS )