Cabinet Approves Semicon 2.0, Mobile Manufacturing Scheme and Urea Policy to Strengthen India's Strategic Manufacturing Ecosystem

Recent Developments:

• The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, approved Semicon 2.0 with an outlay of ₹1.275 lakh crore, the Mobile Phone Manufacturing Scheme (MPMS) with ₹62,500 crore, and the National Investment Policy for Urea (NIPU) 2026.
• The approvals are intended to strengthen domestic manufacturing, technology sovereignty, fertiliser security, supply chain resilience, and import substitution, while supporting the objectives of Atmanirbhar Bharat, Make in India, and PM Gati Shakti.

Background:

Need for the Cabinet Approvals:

• India has been pursuing a long-term strategy to reduce dependence on imports in critical and strategic sectors.
• Global semiconductor shortages, geopolitical conflicts, and supply chain disruptions have exposed vulnerabilities in excessive reliance on external manufacturing.
• Rapid expansion of Artificial Intelligence (AI), consumer electronics, electric vehicles, telecommunications, and defence technologies has substantially increased global demand for semiconductors.
• The approved initiatives collectively aim to strengthen manufacturing competitiveness, strategic autonomy, and economic resilience.

India Semiconductor Mission (Semicon 2.0):

About the Programme:

• Semicon 2.0 has been approved with a total outlay of ₹1.275 lakh crore for developing a comprehensive semiconductor design, manufacturing, packaging, research, and supply-chain ecosystem.
• The programme builds upon the achievements of India Semiconductor Mission (ISM) 1.0 and provides sustained policy support for the next phase of semiconductor development.

Major Objectives:

• Develop indigenous semiconductor design capabilities.
• Expand domestic chip manufacturing capacity.
• Strengthen semiconductor raw material and equipment ecosystems.
• Reduce dependence on imported semiconductor components.
• Support India's growing demand for AI, electronics, telecommunications, automotive and defence chips.
• Establish a complete end-to-end semiconductor value chain.

Six Pillars of Semicon 2.0:

• Chip Design, strengthening intellectual property creation and innovation.
• Chip Development, expanding indigenous semiconductor technologies.
• Domestic Chip Manufacturing, increasing fabrication capabilities.
• Semiconductor Supply Chain, supporting equipment, specialty chemicals, minerals and industrial gases.
• AI-oriented Semiconductor Ecosystem, meeting future demand for advanced AI processors.
• Integrated Semiconductor Value Chain, connecting design, fabrication, packaging, testing and manufacturing.

Expected Outcomes:

• Investments of nearly ₹4 lakh crore are expected.
• Semiconductor production worth approximately ₹2 lakh crore is expected during the scheme period.
• India aims to achieve substantial self-reliance in semiconductor manufacturing by the end of the programme.
• The programme is expected to strengthen India's position in the global semiconductor value chain.

Progress under ISM 1.0:

• ISM 1.0 had an allocation of ₹76,000 crore.
• Twelve semiconductor projects with cumulative investments of approximately ₹1.64 lakh crore were approved.
• Significant investments were led by Tata Electronics and other semiconductor manufacturers.
• Commercial production has already commenced in some approved facilities, providing an initial manufacturing base for the country.

Mobile Phone Manufacturing Scheme (MPMS):

About the Scheme:

• The Government approved the Mobile Phone Manufacturing Scheme with a financial outlay of ₹62,500 crore.
• The scheme seeks to develop globally competitive Indian mobile brands, strengthen domestic manufacturing, and promote technological sovereignty.

Major Incentives:

• Production-linked incentives ranging between 2.25% and 5% on eligible sales.
• Additional incentive of up to 1.5% for higher domestic sourcing of components and sub-assemblies.
• Additional incentive of 3% for product design and research & development.

Expected Outcomes:

• Mobile phone production worth nearly ₹39 lakh crore during the scheme period.
• Significant growth in mobile phone exports.
• Creation of nearly 60,000 direct employment opportunities.
• Expansion of domestic intellectual property, patents and innovation.

National Investment Policy for Urea (NIPU) 2026:

About the Policy:

• NIPU 2026 has been approved to establish nine new gas-based urea plants with a combined production capacity of approximately 10 million tonnes.
• The policy seeks to make India self-reliant in urea production, thereby reducing import dependence.

Present Status of India's Urea Sector:

• Annual urea demand is increasing by nearly 5%.
• Domestic production is approximately 30 million tonnes.
• Total national requirement is nearly 40 million tonnes.
• Around 10 million tonnes are currently imported annually.

Major Reforms Compared with NIP 2012:

• Fixed and variable costs have been separated to improve transparency.
• Return on Equity (RoE) has been rationalised with a minimum of 12% and a maximum of 16%.
• Foreign exchange risks have been moderated through conversion of fixed costs into Indian Rupees after four years.
• Equal incentives have been provided to government, private, and cooperative sector projects.

Expected Benefits:

• Estimated savings exceeding ₹250 crore per plant compared with the earlier policy.
• Improved investment certainty.
• Enhanced domestic fertiliser security.
• Reduced subsidy burden arising from imports.

Significance for India:

Manufacturing and Industrial Growth:

• Expands domestic manufacturing across strategic sectors.
• Encourages technology-intensive industries.
• Promotes employment generation and skill development.
• Supports the growth of ancillary manufacturing industries.

Economic Significance:

• Attracts substantial domestic and foreign investment.
• Expands exports of electronics and mobile phones.
• Improves India's manufacturing share in Global Value Chains (GVCs).
• Reduces foreign exchange outflow through import substitution.

Strategic Significance:

• Strengthens technological sovereignty in semiconductors.
• Reduces vulnerability to geopolitical supply disruptions.
• Improves defence manufacturing capability.
• Enhances resilience of critical industrial supply chains.

Agricultural Significance:

• Improves long-term fertiliser availability.
• Reduces dependence on imported urea.
• Supports national food security through reliable fertiliser supply.

Challenges:

Semiconductor Sector:

• Semiconductor fabrication requires very high capital investment and advanced manufacturing technology.
• India continues to depend heavily on imported semiconductor equipment and specialised materials.
• Availability of highly skilled semiconductor professionals remains limited.
• Semiconductor manufacturing requires uninterrupted electricity and ultra-pure water infrastructure.

Mobile Manufacturing:

• Domestic value addition remains relatively low because several critical components continue to be imported.
• Indian mobile brands face intense global competition.

Urea Sector:

• Long-term availability of affordable natural gas remains essential.
• Timely commissioning of new plants will determine the success of the policy.

Way Forward:

Semiconductor Ecosystem:

• Encourage global technology partnerships.
• Strengthen semiconductor research, innovation and intellectual property creation.
• Develop indigenous manufacturing of semiconductor materials and equipment.
• Expand semiconductor education and specialised workforce development.

Mobile Manufacturing:

• Increase domestic production of electronic components.
• Promote indigenous design capabilities.
• Expand export competitiveness through quality and innovation.

Urea Production:

• Ensure timely implementation of new projects.
• Improve operational efficiency of existing plants.
• Promote balanced and efficient fertiliser use.

Value Addition for UPSC:

Important Schemes and Initiatives:

• India Semiconductor Mission (ISM) was launched in 2021 with the objective of developing a complete semiconductor ecosystem.
• Semiconductors are indispensable for Artificial Intelligence, 5G, Internet of Things (IoT), Electric Vehicles (EVs), consumer electronics, space technology, and defence systems.
• ATMP (Assembly, Testing, Marking and Packaging) and OSAT (Outsourced Semiconductor Assembly and Test) represent critical downstream stages in semiconductor manufacturing.
• Global Value Chains (GVCs) involve the production of goods through internationally distributed stages of manufacturing and value addition.
• The initiatives complement Atmanirbhar Bharat, Make in India, Digital India, National Policy on Electronics, Production Linked Incentive (PLI) Scheme, and PM Gati Shakti by strengthening India's manufacturing ecosystem and strategic technological capabilities.