The Union cabinet has approved production-linked incentives worth Rs 40,995 crore for electronics manufacturing companies, Union communications minister Ravi Shankar Prasad said on Saturday.

“Two long-term policy decisions have been taken to make India a hub of electronics manufacturing in new directions and medical electronics. We will give Rs 40,995 crore in the coming five years for production linked-incentives,” Prasad said. Incentives will be linked to incremental sales and capital investment of the companies, he said.

“Because of these schemes, we hope to generate manufacturing revenue potential of Rs 10 lakh crore by 2025,” Prasad said.

In a statement, the ministry of electronics and information technology said the scheme is aimed at boosting domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including assembly, testing, marking and packaging (ATMP) units.

“The scheme shall extend an incentive of 4 per cent to 6 per cent on incremental sales over the base year of goods manufactured in India and covered under target segments, to eligible companies, for a period of five years subsequent to the base year as defined.

“Under the scheme, the domestic value addition for mobile phones is expected to rise to 35-40 per cent by 2025 from the current level of 2-25 per cent,” it said.

The statement said the scheme has a potential to generate a total employment opportunity of about eight lakh, both direct and indirect.

“We want big companies to come to India and invest. Whatever they will invest and the incremental sale that they make, we will give an incentive of 4-6 per cent. We also want to turn India’s three-four companies into champion companies,” Prasad said.

Additionally, the government will also promote manufacturing clusters for electronics which will be centred around one big company and associated value chain companies to make a final big product, Prasad said.

Analysts said these schemes will benefit high-end mobile manufacturers such as Apple and Samsung. Even contract manufacturers such as Foxconn and Wistron will benefit. Indian manufacturers too can be weaned away from their dependence on China.

China accounts for close to 30 per cent of global exports of electronics and electronic components and this over-dependence is hurting the global economy and companies are now on a lookout for alternative production hubs.

Under the scheme for components makers and semiconductors, the government will provide financial incentive of 25 per cent on capital expenditure for the identified list of electronic goods that comprise a downstream value chain of electronic products, including components, semiconductor or display fabrication units.

The government has earmarked a budget outlay of Rs 3,285 crore over a period of eight years. The scheme is expected to create around 6 lakh direct and indirect jobs. It will be applicable to investments in new units and expansion of capacity or modernisation and diversification of existing units.

The scheme will be open for applications initially for three years from the date of its notification and the incentives will be available for the investment made within five years from the date of acknowledgement of application.