Electronics Component Manufacturing Scheme: what the incentive rates, thresholds and recovery terms say

The Electronics Component Manufacturing Scheme (ECMS), notified by the Ministry of Electronics and Information Technology (MeitY) on 8 April 2025 with an outlay of INR 22,919 crore including administrative expenses, pays turnover-linked incentive at 1 to 10 per cent of incremental sales, capex incentive at 25 per cent of eligible capital expenditure, or both together for the two selected bare components in segment C. Every rate is conditional: 1 percentage point of the turnover rate, or 5 points of the capex rate, is released only if an employment threshold is met, and the guidelines cap total incentive at 50 per cent of eligible investment. The portal states that the window for segments A, B, C and E closed on 30 September 2025 and that the segment D window remains open until 30 April 2027.

What are the instruments, and which of them bind?

The scheme is the Gazette notification of 8 April 2025, F. No. W/49/2024-IPHW, reference CG-DL-E-08042025-262341. MeitY issued the guidelines on 26 April 2025. Under paragraph 1.2 of the guidelines the scheme prevails over them.

Four later documents change the picture. An addendum of 7 July 2025 added segment E, the small form-factor pluggable optical transceiver, with its own rates and thresholds. A second paper of that date has MeitY pay the applicant directly, not through the project management agency (PMA) that appraises applications. An amendment of 30 July 2025 extended the window. A clarification of 29 September 2026 confines segment D magnets to those outside the Ministry of Heavy Industries scheme notified on 15 December 2025.

Who is eligible?

An applicant is a company registered under the Companies Act, 2013 or a limited liability partnership (LLP) registered under the Limited Liability Partnership Act, 2008, investing in the manufacture of target goods in India. One application is filed for each target product. A revision means withdrawing and filing afresh, and the withdrawn fee is forfeited.

For segments A, B and C the test is size, taken from the applicant together with its group companies and joint ventures. A group company is one where the applicant holds 26 per cent or more of the votes or appoints over half the board. The applicant must show either consolidated global electronics system design and manufacturing (ESDM) revenue or manufacturing revenue for financial year (FY) 2023-24 at the level in paragraph 3.2.1 of the guidelines. The figures are INR 250 crore and INR 750 crore for display and camera modules, Li-ion cells, enclosures and surface mount device (SMD) passives; INR 50 crore and INR 150 crore for non-SMD passives, electro-mechanicals, multi-layer printed circuit board (PCB) and the optical transceiver; and INR 500 crore and INR 1,500 crore for high-density interconnect (HDI), modified semi-additive process (MSAP) and flexible PCB, in that order ESDM then manufacturing. An applicant that meets only the manufacturing figure must also show technological capability, such as in-house capability, a binding term sheet with a technology partner or a transfer of technology agreement.

For segment D the test is financial: net worth, certified as at a date not older than 31 March 2024, of at least half the proposed investment, or else a board resolution committing the investment and naming the source of funds.

What are the three incentive types, and at what rates?

The notification defines turnover-linked incentive as a percentage of net incremental sales over a base year, capex incentive as a percentage of eligible capital expenditure, and hybrid incentive as the two combined. They go to different segments: turnover-linked to sub-assemblies (A), bare components (B) and the telecom sub-assembly (E); hybrid to selected bare components (C); capex to the supply chain and capital goods segment (D).

Annexure A(II) gives the turnover rate as six figures with slashes between them. Paragraph 4.2 of the guidelines runs the incentive over six consecutive years, and we read the six figures as year one to year six, though the annexure does not label the columns.

Segment                              Turnover rates, per cent     Capex
1 Display module                     4/4/3/2/2/1                  none
2 Camera module                      5/4/4/3/2/2                  none
3, 4 Non-SMD passive, electro-mech.  8/7/7/6/5/4                  none
5 Multi-layer PCB, 6 layers or less  6/6/5/5/4/4                  none
5 Multi-layer PCB, 8 layers or more  10/8/7/6/5/5                 none
6 Li-ion cells (digital use)         6/6/5/5/4/4                  none
7 Enclosures                         7/6/5/4/4/3                  none
8 HDI, MSAP, flexible PCB            8/7/7/6/5/4                  25 per cent
9 SMD passive components             5/5/4/4/3/3                  25 per cent
10, 11 Supply chain, capital goods   none                         25 per cent
12 Optical transceiver (E)           5/4/4/3/2/2                  none

Two top-ups sit outside the table: 1 point more for a multi-layer PCB maker that sources laminate in India, and 2 points for a Li-ion cell maker that sources cathode active material in India, pro rata where partial. From the second year the guidelines also require such an applicant to localise at least one listed input each year.

What are the thresholds?

Annexure A(III) sets, for each year, cumulative incremental investment, incremental sales and cumulative incremental employment. For non-SMD passive components, sales run INR 15 crore in year one, then 30, 45, 60, 75 and 90 crore; investment runs INR 10 crore to INR 50 crore over five years; employment runs 30 to 180 persons. Annexure A(II) sets the floor for cumulative investment: INR 250 crore for display and camera modules and SMD passives, INR 500 crore for Li-ion cells and enclosures, INR 1,000 crore for HDI, MSAP and flexible PCB, INR 50 crore for the other bare components and the optical transceiver, and INR 10 crore for segment D.

For turnover-linked incentive, incremental sales and cumulative incremental investment are mandatory. Of the rate, 1 percentage point is paid only if the employment threshold is met; otherwise the rate is cut by that point. For capex incentive, meeting the investment threshold and starting commercial production are mandatory, and 5 of the 25 points are paid only on meeting the employment threshold. Employment is average monthly headcount over twelve months, direct or contractual, from Employees' Provident Fund Organisation records, excluding apprentices and casual labour.

What counts as investment and as manufacturing?

Eligible investment covers plant, machinery, tools, utilities and in-house research and development, with packaging, freight, insurance and erection capped at 7.5 per cent of base cost. Land, buildings, consumables, raw material, technology transfer fees and royalty are not incentivised.

Contract manufacturing does not qualify, and job work may not be a significant part of the process. Investment or sales incentivised under another government scheme are excluded. Commercial production means that production has started, the assets are capitalised, and a Chartered Engineer and the statutory auditor have certified both.

When does the window open, and how long does the incentive run?

For A, B and C the window opened on 1 May 2025 for three months; the 30 July 2025 amendment extended it, for E as well, to 30 September 2025. For D it opened on 1 May 2025 for two years, with applications appraised as they arrive and investment counted if made within five years of acknowledgement. Both instruments allow reopening. The non-refundable fee is INR 2 lakh, 3 lakh or 5 lakh by segment.

Turnover-linked incentive runs six years, with an optional gestation year. The base year is FY 2024-25, or FY 2025-26 on that option, and the incentive years run FY 2025-26 to FY 2030-31 or FY 2026-27 to FY 2031-32. Claims are due within nine months of the financial year end. Acknowledgement is not approval: the Governing Council recommends, the Secretary of MeitY approves projects with incentive up to INR 100 crore, and the Minister those above.

What does an applicant undertake, and when is incentive recovered?

The obligations sit in several paragraphs of the guidelines:

• Self-certified quarterly review reports within 30 days of each quarter end, and notice to the PMA of any change in shareholding.
• Statutory auditor and Chartered Engineer certificates, a separate fixed asset register, and physical verification of a sample covering at least 25 per cent of eligible investment.
• Before payment, a management undertaking, a board resolution accepting the scheme terms, and an indemnity bond to return any false or excessive claim with interest at the three-year State Bank of India marginal cost of funds based lending rate (MCLR), compounded annually.
• Integrity Pact undertakings, Format A with each application or claim and Format B before funds are released.
• On related party sales or investment, 80 per cent is released on claims filed before Form 3CEB is due and the balance after certification; later adjustments are refunded.

Recovery has two triggers. Paragraph 19.9 requires refund of excess incentive with that interest. Paragraph 19.10 requires refund of all incentive disbursed, with interest, where eligibility or payment was obtained by misrepresentation or false information, after a hearing. Separately, the Governing Council may revoke approval for sluggish progress (no investment in year one, or cumulative investment below half the threshold) or a substantial shortfall in sales.

What does the arithmetic look like?

An illustration. The applicant and its figures are hypothetical. It makes non-SMD passive components, has qualified on revenue, and meets the Annexure A(III) sales threshold exactly in each of the six years, so incremental sales are INR 15, 30, 45, 60, 75 and 90 crore.

Turnover-linked incentive, segment 3, rates 8/7/7/6/5/4 per cent
  Year 1   8 per cent of INR 15 crore                 INR 1.20 crore
  Year 2   7 per cent of INR 30 crore                 INR 2.10 crore
  Year 3   7 per cent of INR 45 crore                 INR 3.15 crore
  Year 4   6 per cent of INR 60 crore                 INR 3.60 crore
  Year 5   5 per cent of INR 75 crore                 INR 3.75 crore
  Year 6   4 per cent of INR 90 crore                 INR 3.60 crore
  Total on INR 315 crore of incremental sales         INR 17.40 crore
  If the employment threshold is missed in every year,
    1 per cent of INR 315 crore is deducted           INR 14.25 crore
  Ceiling at 50 per cent of INR 50 crore invested     INR 25.00 crore

Capex incentive, segment 11, eligible capex of INR 40 crore
  25 per cent                                         INR 10.00 crore
  Employment threshold missed, 20 per cent            INR 8.00 crore

The ceiling is not reached in the first case. The second assumes the INR 40 crore excludes land and buildings and that commercial production has started.

What remains unsettled?

Two points.

Reopening is allowed at any time; none has been notified.

The employment figures for segments 10 and 11 in Annexure A(III), 10 and 20, are footnoted as indicative employment per crore of investment, the actual threshold to correspond to cumulative incremental investment. On that reading INR 40 crore in segment 11 indicates 800 persons, but no instrument fixes the figure.

Paragraph 5.1.3 of the guidelines bars significant job work but gives no percentage.