Tamil Nadu’s New Electronics Hardware Manufacturing Policy Includes Subsidies for Solar Cells

The government has allocated $100 billion for the policy implementation


The state of Tamil Nadu has come out with the ‘Electronics Hardware Manufacturing Policy 2020’ to increase the state’s electronic output to $100 billion (~₹7.3 trillion) by 2025. The government is striving to improve the level of value addition, especially in areas such as solar photovoltaic cells, mobile handsets, LED products, and automotive electronics.

The renewable energy electronics segment, among others, has been selected as one of the priority sectors for developing the state’s core competencies. The policy also aims to contribute 25% of India’s total electronics exports to the world by 2025.

According to the policy, the incentives for large and mega projects will be approved by the industries department, and the structured package will be approved as per the recommendation of the Inter-Departmental Committee (IDC).

The government will formulate a unique package of incentives for the Electronics System Design and Manufacturing (ESDM) units in the micro, small, and medium enterprise (MSME) sector. This will include capital subsidy, interest subvention, low tension power tariff subsidy, generator subsidy, assistance for obtaining intellectual property, and assistance in obtaining certifications.

The government has identified districts under three categories for investments:

  • For investments in the range of ₹2 billion (~$27.2 million)-₹5 billion (~$68.1 million): A capital subsidy of 15% will be applicable in districts A, a capital subsidy of 20% will be applied in districts B, and a capital subsidy of 25% in districts C.
  • For investments more than ₹5 billion (~$68.1 million): A capital subsidy of 18% for districts A, 24% for B, and a capital subsidy of 30% will be applicable in districts C.

Government of Tamil Nadu District Classification

For eligible projects in any government-owned industrial parks in districts C, the land allotment will be made at a 50% subsidized rate for land up to 20% of the eligible fixed assets.

Under the new policy, the ESDM units will be given electricity tax exemption for five years from the date of commercial production on power purchased from the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) or generated and consumed from captive sources.

Environment protection infrastructure like dedicated effluent treatment plants (ETP) or hazardous waste treatment storage and disposal facilities set up by individual manufacturing units would be eligible for an environment protection infrastructure subsidy.

The government of Tamil Nadu is also aiming to promote an eco-park for processing e-waste in an environmentally friendly manner in public-private partnership (PPP) mode to integrate formal and informal operators.

Another critical aspect of the new policy is the stress on the semiconductor fabrication (FAB) industry in Tamil Nadu. For this purpose, the government will constitute a special task force to enable the creation of an appropriate ecosystem. Also, a unique package of incentives will be offered to investors in the FAB sector.

The state is also planning to establish a state-wide hardware product innovation network consisting of several centers operating in a hub-and-spoke model. The system will include a mega electropreneur center (MEC) that will be set up by the Electronics Corporation of Tamil Nadu Limited (ELCOT), and it will help in building a robust ecosystem for start-ups and entrepreneurs. The center of excellence for hardware will include a fully self-contained facility, which will aim to support end-to-end design, development, testing, and certification of innovative hardware products.

Recently, it was reported that the government of India is now promoting self-reliance and is trying to limit India’s dependence on imports and expand domestic manufacturing capabilities. As India tries to maximize the opportunities for solar manufacturing, these initiatives by state governments bode well for the country’s manufacturing goals.

The state government of Gujarat came up with a new industrial policy after the earlier framework came to an end on December 31, 2019. The new industrial policy has been framed to consolidate the momentum and enhance the current growth rate.