Ministerial departments agree to extend Modified Special Incentive Package Scheme by 5 years

NEW DELHI: Prime Minister Narendra Modi's 'Make in India' plan is set to get a boost as various ministerial departments have reached a broad consensus to extend the Modified Special Incentive Package Scheme (M-SIPS) by five years and allow additional benefits for high-investment projects in the country aimed at reducing dependence on electronic imports.

A draft Cabinet note suggesting amendments to the existing M-SIPS scheme was discussed with over a dozen departments, including the commerce ministry, Department of Industrial Promotion and Policy (DIPP) and National Manufacturing Competitiveness Council, which have "broadly supported the proposal," officials in the Department of Electronics and Information Technology (DeitY) said, as per a note seen by ET. Besides allowing the scheme to continue beyond its July 2015 deadline to 2020, the proposal seeks to include consumer electronic products such as smart cards, refrigerators, air conditioners, automatic washing machines and Internet of Things products under the ambit of M-SIPS.

While the department of economic affairs suggested that benefits should be provided prospectively, DIPP added that M-SIPS criteria should be modified to include high technology Internet of Things products and consumer appliances. "Major electronic companies like Panasonic, Samsung, LG, Bosch, Nidec etc are producing these goods and there is strong synergy with their activities in electronics manufacturing," the departments said.

The department of revenue said wafer fabrication and back-end fabrication projects of chips and chip sets, required for making semiconductors, are highly capital intensive, have low economic viability and are not manufactured in India. To make these projects attractive, a subsidy at 10% on production turnover should be offered instead of reimbursing central taxes and duties, it proposed. It is unclear whether these changes will reflect in the upcoming Union Budget on February 28.