Electronic Manufacturing Cluster, Naya Raipur

Introduction- ESDM Sector

Electronics industry, especially consumer electronics, emerged in the 20th century and has now

become a global industry worth billions of dollars. Contemporary society uses all manner of electronic

devices built in automated or semi-automated factories operated by the industry.

Electronics industry reported at USD 1.75 trillion in 2012 is the largest and fastest growing industry in

the world. It is expected to reach USD 2.4 trillion by 2020. Demand in the Indian market was USD 45

billion in 2008-09 and is expected to reach USD 400 billion by 2020. Domestic demand is expected to

be driven by the growth in income levels leading to higher take-off of electronic products, automation

demands of corporate sector, and Government’s focus on e-governance. Domestic production in

2008-09 was around USD 20 billion. However, actual value addition in the domestically produced

electronic product is very low, ranging from 5-10% in most cases. At the current rate of growth, the

domestic production can cater to a demand of USD 152 billion in 2020 as against a demand of USD

400 billion and rest would have to be met by imports. This aggregates to a demand supply gap of

nearly USD 248 billion by 2020. Unless the situation is corrected, it is likely that by 2020, the

electronics import may far exceed oil imports.

Value Chain Analysis

There are mainly three levels in the ESDM value chain, namely, Supply base, Original Equipment

Manufacturing (OEM), and Distribution & Retail channels. Figure below depicts the value chain map

for the ESDM industry.

Exhibit 1: Value chain of ESDM sector

It can be observed from above map that the ESDM value chain starts with the Supply base which

comprises of activities such as component manufacturing, semiconductor fabrication, contract

manufacturing, and original design manufacturing (ODM). Constant flow of raw materials such as

silicon is very crucial for the existence and survival of the mentioned units at this level.

Components manufactured at the first level are shipped to the second level where assembling

happens at Original Equipment Manufacturing (OEM) units. At this level, final consumer electronics &

related items such as Computers, Televisions, Mobile phones, Server and storage devices, Medical

electronics, Industrial electronics, Military and aerospace electronics, etc. are manufactured,

configured and packaged. Packaged electronic items then enter the distribution and retail channel

where those are distributed to the end consumers by distribution and channel partners either through

retail shops or through online shops. End consumers include individual household, commercial

establishments and business units.

Some of the key players in the electronics industry are IBM, Fujitsu, Siemens, Hewlett-Packard, Dell,

Apple, Acer, Lenovo, Xerox, Epson, Kodak, Cannon, Toshiba, Sony, Microsoft, Samsung, LG,

Hitachi, HTC, Philips, Seagate, Alcatel, Cisco, Motorola, Huawei, Ericsson, Nokia, Tellabs, Toyota,

General Motors, Renault, Bosch, Rockwell, and Boeing.

Existing scenario

This section discusses about the existing situation of the ESDM sector at three levels – Global,

National and State levels.

Global Scenario

The global electronics production was estimated at USD 2.1 trillion for 2013, which grew by 20% over

the year 2012 and 5.1% year on year. Since the expansion of the markets for personal mobile

terminals and automobiles will lead to greater production of electronic components, semiconductors

and display devices, production by the global electronics and IT industries is expected to grow at a

modest 4.9% per annum to reach USD 2.3 trillion in 2014. According to the World Semiconductor

Trade Statistics, global semiconductor industry’s sales are estimated at USD 306 billion in 2013, a

4.8% increase compared to 2012. Chart below depicts the segment-wise breakdown of global

electronics sales.

Exhibit 2: Segment wise breakdown, worldwide electronics production 2013

Source: Japan Electronics and Information Technology Industries Association, December 2013

Report

It can be observed from the above chart that Computers and peripherals is the largest segment

comprising 27% of the total global electronics sale followed by communication equipment segment

with 23% share. Semiconductors and Electronic components form 16% and 11% of the total global

electronics sale respectively.

9%

23%

27%

7%

11%

8%

16%

AV Equipment

Communications

Computer and InformationTerminals

Other electronic equipment

Electronic components

Display devices

Semiconductors

Indian Scenario

ESDM industry in India is estimated to have clocked revenues of USD 75.6 billion in 2013, growing at

by CAGR 6.4%. ESDM industry in India constitutes the following sub-segments:

► Electronic products – This includes the total market for domestic consumption of electronic

products in India (either produced locally or imported) as well as the exports of electronic

products manufactured in the country.

► Electronic components – This includes the revenues generated from local manufacturing of

electronic components.

► Semiconductor design – This includes the revenues generated from semiconductor design

activities conducted in the country by local players and captives of semiconductor MNCs

operating from India. It includes revenues from embedded software, VLSI and hardware/board

design.

► Electronic Manufacturing Services (EMS) – This includes the revenues generated from EMS

services delivered from the country.

While the first two components represent the products, the remaining two are more service based

opportunities catering to the domestic and export markets. Electronic products segment forms the

biggest chunk of the ESDM industry in India with an estimated 79% market share in 2013. While

semiconductor design forms 15% of the market, electronic components and EMS services form a very

small portion with 5% and 1% revenue contribution respectively. Chart below depicts the break-up of

industry revenues for ESDM by categories.

Exhibit 3: Indian ESDM Industry Revenues Breakup as of 2013

Source: IESA – F&S Study

It can be observed from above chart that Product revenues constitute the majority of ESDM industry

revenues with 84% market share in 2013 while services revenues account for the remaining 16%.

Product-Services revenue contribution mix is expected to remain similar till 2015. Domestic revenues

accounted for 70% of the industry revenues in 2013 while exports accounted for remaining 30%. Most

79%

5%

15% 1%

Electronic Products

Electronic Components

Seminconductor Design

Electronic ManufacturingServices

of the export revenues are generated from the export of semiconductor design and electronic

products while electronic components and electronic manufacturing services constituting a small

portion of exports.

The robust growth of Indian electronic industry can be attributed to a multitude of factors, including

Growing middle class population; Increasing disposable income and declining electronic product

prices; and Government initiatives such as Spending on laptops & tablets, E-governance initiatives

and Unique Identification (UID) project, Roll out of National Knowledge Network (NKN), Broadband

connectivity to villages, and Roll out of 3G/LTE networks.

Chhattisgarh Scenario

As of now, there is minimal presence of ESDM sector in the state. However, with its inherent

strengths, the state has immense potential to become an ESDM hub of the country.

Chhattisgarh has emerged as a lucrative investment hub among its competing states with sectors like

power, mining and minerals, manufacturing, sponge iron and steel, IT/ITes, biotechnology, food

processing, etc. becoming key investment drivers and has attracted both domestic and foreign

investment over the past few years. The state is steadily garnering support from the investors,

transforming it to a manufacturing and power hub of the country. While the state administration is

based in Raipur, a new capital for Chhattisgarh at Naya Raipur has been developed. Chhattisgarh is

poised to become the next ESDM hub of India with the availability of enabling infrastructure, minerals

and talent pool. Figure below presents advantages of the state for ESDM sector to prosper.

Exhibit 4: Advantage Chhattisgarh as ESDM Destination

Chhattisgarh strengths, in terms of abundant mineral resources, cheap and reliable power, adequate

water availability, better connectivity via roads, airports and railways, and availability of talent pool

with presence of reputed academic, research and training institutes, make it a hot bed for investments

in the ESDM sector. Besides above advantages, Chhattisgarh provides efficient environment for

doing business in the state.

Project Brief- Electronic Manufacturing Cluster, Naya Raipur

Naya Raipur, the new capital city of Chhattisgarh offers a plethora of opportunities for development of

industrial infrastructure in the State. Naya Raipur houses world class amenities like Knowledge

Center with university, research and institutional complexes, 18-hole Golf Course, Theme Township,

Convention Centre, Shopping Malls and Multiplexes. Naya Raipur provides for an ideal location for

development of non-polluting light & service industries in the State. Naya Raipur has around 8000

Hectare land which can potentially be utilized for industrial development.

Exhibit 5: Advantage Naya Raipur

Chhattisgarh State Industrial Development Corporation (CSIDC) in its endeavor of development of the

industrial infrastructure in the state has identified area to an extent of 28.32 hectare at Naya Raipur

for development of Electronic Manufacturing Cluster in the region.

The Project

DeitY, GoI has granted in-principle approval to the proposed Electronic Manufacturing cluster (EMC),

Naya Raipur. The proposed EMC is aimed at providing one stop integrated facilities with

manufacturing support, welfare and common infrastructure facilities to the prospective electronics

manufacturing industries. The proposed EMC is envisaged to house world class eco system for

electronics manufacturing industries. The broad list of support manufacturing facilities proposed in the

EMC is listed below.

► Product design house – CAD/CAM, 3d modelling, animation, etc.

► Tool room – Computerised Numerical Control (CNC), multi cavity melting machines, etc.

► Testing, calibration and certification facility

► Printing and packaging facilities

Site Suitability Assessment

The identified land at Naya Raipur is located at village Tutla and is spread over 28.32 hectares of

land. The site is located in the sector 22 of Naya Raipur and has excellent connectivity through NH-43

and NH-6. An IT SEZ is also proposed in the vicinity of the proposed location. Swami Vivekananda

Airport is situated at a distance of only 7 km from the proposed location of ESDM Park. The site

enjoys abundant water supply from the Mahanadi river and also have also sufficient power connection

to cater the needs of operation in ESDM Park. The location map for the proposed site is as set out

below.

Exhibit 6: Location of the Proposed EMC

The proposed site is in the possession of CSIDC and is well connected with the other parts of the

country through rail and road network. The connectivity is depicted in the figure below.

Exhibit 7: Connectivity of Naya Raipur

Assessments of the key infrastructure availability in the catchment area of the Project Site suggest

that the catchment region is well equipped with the sector enabling infrastructure. The key

infrastructure parameters in Naya Raipur have been assessed below.

Exhibit 8: Key Infrastructure Facilities at Naya Raipur

Roads

Six-lane expressways provide easy access to the city. At present, access is

through NH-43 at the south- eastern boundary and NH-6 at the northern

boundary of Naya Raipur. Nearly 75.2 km of 4 lane/six lane roads have

already been constructed. 61 km road network is under construction.

Railway

Naya Raipur is also well connected by rail. The Raipur railway station, the

biggest junction in the state, is 20 kilometres away and the new railway station

at Mandir Hassaud is just 2 kilometres away.

Airport

The airport Swami Vivekananda Airport, formerly known as Mana Airport, lies

5-7 kilometers and separates the new city from Raipur. The city is linked by

regular flights with New Delhi, Mumbai, Kolkata, Bhubaneshwar, Nagpur,

Bhopal, Indore, Ahmedabad & Hyderabad.

Power Supply

The power requirement of Naya Raipur is to be met in three phases. The city

is having an underground power distribution system along with SCADA

(Supervisory Control and Data Acquisition) system to have online monitoring

and control of power supply. Non-conventional and alternative energy

resources are being used to the maximum. Street lighting is planed using

latest technology with network control and LEDs. Solar power will be used

widely in administrative buildings, street lighting and traffic signals.

Water Supply

The initial requirement for water is being met by constructing an anicut on the

Mahanadi river near the village Tila, 23 km. from Naya Raipur. The city water

supply system in Naya Raipur is one of the few in India to work on the Public

Private Partnership model. It shall be a 24X7 water supply with hydro

pneumatic pumping network.

Drainage

Drainage along roads is to be provided without disturbing the major natural

drainage channels. The solid waste management system based on the PPP

model will ensure proper segregation of a waste at source; separate disposal

of hazardous or bio-medical waste; and intensive tree plantation on disposal

areas.

Sanitation & Waste

Management

Naya Raipur will be a zero discharge city having decentralised sewage

treatment for better efficiency.

Telecommunication

The communication system is planned for both wired and wireless services for

voice, data and Value Added Services (VAS). It is proposed to have an

Overlay Area Network (OAN) in the city having 4 loops to cover the total area

with optical fibre connectivity with redundancy. This will provide a backbone

for the modern communication and data transmission within the city of Naya

Raipur. Besides, backbone infrastructures such as ducts are to be provided

for the city level telecom network for the wired broadband and Value Added

Services. It is also proposed to develop the passive infrastructure in the entire

city for the wireless services which may cater for GSM/CDMA and other

modern services such as 3G/WIMAX etc.

Area Statement

Department of Electronics and Information Technology (DEIT), Ministry of Communication and IT,

Government of India issued notification on Electronics Manufacturing Clusters (EMC) Scheme to

provide world class infrastructure for attracting investment in the sector of Electronic Systems Design

and Manufacturing. In order to avail the benefits under the EMC Scheme, CSIDC appointed

Chhattisgarh Industrial and Technical Consultancy Centre (CITCON) for preparation of Preliminary

Detailed Project Report (PDPR) for development of EMC at Naya Raipur. The area statement set out

in the PDPR is set out in exhibit below.

Exhibit 9: Area Statement of the Proposed EMC at Naya Raipur

S. No

Particulars Area (Hectares) Percentage of total Area (%)

Processing Area

1 Total area for Industrial Plots 10.67 37.67%

2 Flatted Factories for industries like tool room, design house, testing & certification facilities etc.

1.78 6.28%

3 Local shopping centre 0.25 0.9%

4 Ware house 0.47 1.68%

5 Other Amenities – PHC, Police Post, Bank, Canteen etc.

0.25 0.90%

6 Road Area 7.11 25.12%

7 Government Support Office & Administrative Block

0.25 0.90%

8 Water Treatment Plant, Over Head Tank and Fire Fighting Station

0.33 1.15%

9 Sewage Treatment Plant (STP) 0.33 1.15%

10 Power Sub Station 0.38 1.33%

11 Power back-up comprising switch room & DG Shed

0.16 0.57%

12 Welfare Services Complex – hostel & mess and Restaurant

0.26 0.92%

13 Recreation facility, playground and club house

0.26 0.92%

14 Support Services Block – Centre of Excellence, R&D facilities, Incubation and consultancy services centre, auditorium, video conferencing hall, cloud computing etc.

1.38 4.89%

Non Processing Area

15 Government and regulatory support services – Office of Development Commissioner, taxation departments, etc.

0.25 0.90%

16 Solid Waste Handling Areas 0.33 1.15%

17 Parking Bay 0.81 2.87%

18 Green Belt + Garden 3.03 10.71%

19 Public amenities – toilet etc 0.003 0.01%

20 Entrance plaza comprising security post etc.

0.002 0.01%

Total 28.32 100%

Source: PDPR prepared by CITCON

Of the total saleable area of 13.43 hectare (1-6 above), total industrial plots constitute around 10.67

hectares which have been divided into 47 plots of different sizes.

Project Cost Estimates

In the PDPR report prepared by CITCON, total cost estimates for development of the Project is

estimated to be INR 105.2 Crore. The project cost of INR 105.23 Crore is envisaged to be funded by

way of grant-in-aid from DeitY, MoC&IT, GoI to an extent of INR 50 Crore while balance INR 55.23

Crore will be funded by either the Government of Chhattisgarh or the Special Purpose Vehicle (SPV)

formed for development of the project.

Probable Project Structuring

The project is envisaged to be developed under the EMC Scheme set out by DeitY, Ministry of

Communication & Information Technology, Government of India. The salient features EMC

Scheme for implementation of the project are set out below.

► Proposed EMCs may use Information Technology Investment Regions (ITIRs) infrastructure,

wherever available

► Implementation of scheme will be through a Special Purpose Vehicle (SPV) which will carry

out the business of developing, operating and maintaining the infrastructure, amenities and

other common facilities created in EMCs

► The guidelines for the institutionalization of SPV set out in the Government of India

notification dated January 30, 2014 are as set out below

► The constituent units including industry associations, FIs, Banks, Academic / R&D institutions,

Government Agencies and the Chief Promoter and other investors may form the SPV.

► At least 7 of the EMC units should be on the Board of Directors of the SPV

► Wherever the SPV is with participation of Government / Government Agency (State / Local),

there shall be atleast one representative of the concerned Government or its agency on the

board of directors of the SPV and any change in the equity structure shall be with the prior

approval of the relevant Government

► Any changes in the equity structure of the SPV, in spite of whether Government or its agency

participates as equity partner in the SPV, shall have prior approval of Department of

Electronics and Information Technology, Ministry of Communication and Information

Technology, Government of India

► The EMC units must hold 51% of the share capital of the SPV with no single unit owning more

than 25% of the share capital. This is requirement is to be fulfilled either at the time of

application for assistance or within a specified time period

Based on the guidelines set out the EMC Scheme, the structuring for the proposed EMC at Naya

Raipur is as set out below.

Exhibit 10: Project Structure for the Proposed Project

As demonstrated in the figure above, CSIDC will be the Chief Promoter, forming a SPV with at least 6

EMC units and other investors, wherein CSIDC along with 6 other EMC units will have to hold at least

51% of the total shareholding of the SPV and also none of the individual unit can hold more than 25%.

Incentives being offered by state government

Chhattisgarh government is offering a number of incentives as per its Electronics and

IT/ITeS Policy 2014-19:

► 100% Entry Tax/ CST reimbursement for 10 years

► 75% Interest Subsidy for 8 years; maximum limit of INR 110 lakhs per annum

► 50% Fixed Capital Investment Subsidy with maximum limit of INR 150 Lakh

► 12 years of Electricity Duty Exemption

► 80% rebate on land premium

► 100% exemption on stamp duty as well as 100% exemption on sale to another IT unit

► Subsidy in bandwidth utilization

► Concession on built-up space lease/rental

► Subsidy on Quality certification and technical patent

► Industrial award scheme

Way Forward

CSIDC has issued an EOI on March 4, 2015 for selection of partners for SPV that will undertake

development, operation and management of Electronic Manufacturing Cluster. Further, members of

SPV will set up their unit in the proposed cluster.

Interested organizations/ consortiums are requested to submit EOI providing following details at

CSIDC office on or before April 20, 2015.

► Details of the company / each member of the consortium

► Audited annual accounts of the company /all the consortium members for the 3 years.

► Details of the technical expertise and operational experience in ESDM sector giving details for

each project - the year of establishment, cost of the project etc.