SPECS

The scheme aims to offset the disability for domestic manufacturing of components and semiconductors to strengthen the electronics manufacturing ecosystem. Through this scheme, a financial incentive of 25% on capital expenditure to legal entities registered in India.

The scheme "Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS)" has been launched by the Ministry of Electronics and Information Technology (MeitY) (Industrial Promotion – Electronics Hardware Manufacturing (IPHW) Division), Government of India, aims to help offset the disability for domestic manufacturing of electronic components and semiconductors to strengthen the electronics manufacturing ecosystem in the country, in alignment with the National Policy on Electronics 2019 (NPE 2019) and the Government's "Make in India" and "Digital India" programmes. Through this scheme, a financial incentive of 25% of capital expenditure (on a reimbursement basis) is provided to any legal entity registered in India investing in eligible electronic components, semiconductor/display fabrication units, Assembly, Testing, Marking and Packaging (ATMP) units, specialised sub-assemblies, and capital goods for manufacture of the aforesaid goods – covering both new units and expansion of capacity/modernisation and diversification of existing units. The scheme is implemented by MeitY through a Nodal Agency appointed as the Project Management Agency (PMA), which is responsible for receipt of applications, appraisal, issuance of acknowledgements, verification of claims, and disbursement of incentives; applications received under the scheme are appraised on an ongoing basis by the PMA, which places eligible applications before the Executive Committee (EC) constituted by MeitY, chaired by an officer not below the rank of Joint Secretary.

• The applicant should be a legal entity registered in India. The applicant may be a Private Limited Company, Public Limited Company, Sole Proprietorship, Partnership, or Limited Liability Partnership registered in India.
• The applicant should be proposing to invest in a project/unit for the manufacturing of eligible goods as per the list in Annexure-1 of the SPECS Guidelines.1. Each application shall be treated as a new investment and as an independent application. The application shall be only for single-phase projects; phase-wise applications shall not be considered under the Scheme.
• There is no restriction on any applicant from making multiple applications and/or for multiple locations.
• The applicant should ensure that the proposed investment in capital expenditure is greater than or equal to the threshold value for the eligible goods under SPECS (as per Annexure-1 of the Guidelines). 1. The scheme is applicable for investments in new units as well as expansion of capacity/modernisation and/or diversification of existing units.
• The minimum investment thresholds are the same for new units or expansion of capacity/modernisation/diversification of existing units.
• A project/unit proposed under the Scheme may include multiple manufacturing facilities at one or more proposed locations. There is no limit on the number of applications for an applicant.
• If an application covers more than one product category, the applicable minimum threshold of investment (capital expenditure) shall be the highest of the individual threshold investment for each of the product categories covered.
• Eligibility under the SPECS Scheme shall not affect eligibility under any other scheme, and vice-versa.
• The application shall contain the requisite land documents such as a registered sale deed and/or registered rent/lease agreement on the land for a period of not less than 10 years from the date of application in usual circumstances.
• In case land has been taken on rent/lease for a period less than 10 years, such application shall be processed if there is a renewal clause for extension of the rent/lease agreement in the registered document. If the renewal clause is not present, the application may be referred by the Project Management Agency (PMA) to the Governing Council (GC) for an appropriate decision.
• In case the land has not been purchased or taken on rent/lease at the time of application, the applicant shall provide definite location/plot details and a suitable document confirming availability of the land; however, the final registered document shall be provided before the submission of the Appraisal Report by PMA for consideration of the Executive Committee (EC).
• The application shall contain a Financial Closure for the investment required for the complete project. Financial Closure means:

• Firm commitment from the applicant to invest in the project under SPECS in the form of a Board Resolution.
• Sanction letter/Letter of Intent (LoI) from a Bank/Financial Institution (FI)/loan agreement with Bank/FI for the debt portion of the investment proposed.
• Legally binding commitment from equity/unsecured loan providers to provide or mobilise funds, in the form of an agreement backed by a Board Resolution (Board Resolution is not applicable in case of Banks and Financial Institutions; in that case, a sanction letter and/or LoI from the Bank/Financial Institution may be provided).
• Legally binding commitment of funding from internal accruals (applicable in case the applicant has any existing unit; shall be assessed from past performance, including Profit and Loss Account, Cash Flow Statements, etc.).
• Documents showing capability of fund providers in the form of unencumbered liquid funds (not applicable in case of Banks and Financial Institutions).

> Financial Incentive:

• A financial incentive of 25% of eligible capital expenditure is provided to approved units manufacturing goods as per the eligible list annexed to the Scheme.
• The total incentive under the Scheme is 25% of eligible capital expenditure for an approved application.
• The incentive is over and above any incentive offered by the State Government or any of its agencies or local bodies.
• Applicants shall also be eligible to take benefit under any other scheme(s) of the Government of India; however, investments committed under the Modified Special Incentive Package Scheme (M-SIPS) for which incentives have been claimed shall not qualify as eligible investments under SPECS.

> What Constitutes Eligible Capital Expenditure

Capital expenditure includes the following:

• Expenditure on plant, machinery, equipment and associated utilities – including tools, dies, moulds, jigs, fixtures (including parts, accessories, components, and spares thereof); expenditure on packaging, freight/transport, insurance, and erection and commissioning. Associated utilities include captive power and effluent treatment plants; clean rooms; air curtains; temperature and air quality control systems; compressed air, water and power supply; and IT/ITES infrastructure related to manufacturing including servers, software and Enterprise Resource Planning (ERP) solutions.
• Expenditure on Research and Development (R&D) – including in-house and captive R&D, test and measuring instruments, design tools, software cost (directly for R&D), and expenditure on technology, Intellectual Property Rights (IPR), patents and copyrights.
• Expenditure on Transfer of Technology (ToT) – including cost of technology and initial technology purchase related to eligible goods.
• Expenditure on refurbished/used/second-hand plant, machinery and equipment (including associated utilities and R&D) – whether imported or domestically procured – not exceeding 20% of total eligible plant, machinery and equipment. Such equipment must have a minimum residual life of at least 5 (five) years at the time of transfer of assets.

The following are NOT covered as eligible capital expenditure

• Expenditure on land and building (including factory building/construction).
• Expenditure on consumables and raw materials used for manufacturing.

> Sub-Limits within Eligible Capital Expenditure

• Associated utilities expenditure: capped at not more than 20% of the total eligible capital expenditure for plant, machinery and equipment.
• Research and Development (R&D) expenditure: not exceeding 20% of the total eligible capital expenditure for plant, machinery, equipment and associated utilities.
• Transfer of Technology (ToT) expenditure: not exceeding 10% of the total eligible capital expenditure for plant, machinery, equipment and associated utilities.
• Refurbished/used/second-hand plant, machinery and equipment: not exceeding 20% of total eligible capital expenditure.

> Eligible Goods and Minimum Investment Thresholds

CategoryDescription of GoodsMinimum Investment ThresholdASurface Mount Technology (SMT) components including Light Emitting Diode (LED) Chips; Chip Modules for Smart Cards, Radio Frequency Identification (RFID) Antenna and Labels, Chip-on-Board (CoB)/System in Package; Passive components (resistors, capacitors, ferrites) for electronic applications; Electromechanical components (transformers, inductors, coils, relays, switches, micro motors, stepper motors, Brushless Direct Current (BLDC) Motors, Connectors, Heat Sinks, Antenna, Speakers, Microphones, etc.) for electronic applications; Magnetrons, Wave guides, Circulators, Couplers, Isolators, Filters, Magnets, Radio Frequency (RF) Components for electronic applications; Printed Circuit Boards (PCBs), PCB Laminates, Prepegs, Photopolymer films, PCB Printing Inks; Printed Flexible Electronics; Sensors, Transducers, Actuators and Crystals for electronic applications; Camera Modules, Vibrator motor/ringer; Universal Serial Bus (USB)/Data Cables, High-Definition Multimedia Interface (HDMI) Cables; Capital goods for all goods covered under SPECS.₹5,00,00,000/- (₹5 Crore)BActive Components – Discrete semiconductor devices (transistors, diodes, etc.); Power semiconductors (Field Effect Transistors (FETs), Metal Oxide Semiconductor Field Effect Transistors (MOSFETs), Thyristors, etc.); Preform of Silica and Optical Fibre; Display Assembly and Touch Panel/Cover Glass Assembly.₹15,00,00,000/- (₹15 Crore)CMicro/Nano-electronic components such as Micro Electro Mechanical Systems (MEMS) and Nano Electro Mechanical Systems (NEMS); Assembly, Testing, Marking and Packaging (ATMP) units.₹25,00,00,000/- (₹25 Crore)DMechanics (plastic and metal parts) for electronic applications.₹75,00,00,000/- (₹75 Crore)ECompound Semiconductors such as Gallium Nitride (GaN), Silicon Carbide (SiC), Gallium Arsenide (GaAs), and Silicon Photonics devices/Integrated Circuits, Optoelectronic components.₹2,50,00,00,000/- (₹250 Crore)FSemiconductor Wafers.₹5,00,00,00,000/- (₹500 Crore)GSemiconductor Integrated Chips (ICs), including Logic [Microprocessors, Microcontrollers, Digital Signal Processors (DSP), Application Specific Integrated Circuits (ASICs), etc.]; Memory; Analogue/Mixed Signal ICs, etc. Display fabrication units including Liquid Crystal Displays (LCD), Light Emitting Diode (LED), Organic Light Emitting Diode (OLED), etc., for electronic applications.₹10,00,00,00,000/- (₹1,000 Crore)