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Karan Singh
| Updated: 14 Mar, 2022 | Category: Latest News

Design Linked Incentive (DLI) Scheme – An Overview

Design Linked Incentive

The world’s fastest-growing industry is the electronics industry, with applications in all sectors or areas of the economy. Semiconductors have been the main enabler in the development of electronics for over 5 decades and will play an important role in the development of new applications, including AI (Artificial Intelligence), robotics, smart mobility, IoT (Internet of Things), g5, etc. In India, the Ministry of Electronics & Information Technology has introduced the Design Linked Incentive (DLI) Scheme to balance the disabilities in the domestic industry engaged in semiconductor design to not only move up in value-chain but also enhance the semiconductor chip design ecosystem in the country. CDAC is accountable for the implementation of the Design Linked Incentive Scheme as a Nodal Agency.

The Design Linked Incentive (DLI) Scheme intends to provide financial incentives and design infrastructure support across different stages of development/advancement and deployment of semiconductor design(s) for ICs (Integrated Circuits), SoCs (System on Chips), Chipsets, Systems and IP cores & semiconductor linked design(s) over 5 years of the time period.

What is the Objective of the Design Linked Incentive (DLI) Scheme?

  1. Proving and nurturing the growth of the domestic companies, MSMEs, and start-ups;
  2. Facilitating and strengthening access to semiconductor design infrastructure for the MSMEs and start-ups;
  3. Achieving noteworthy indigenisation in semiconductor content and IPs involved in the electronic items deployed in the country, thereby import substitution & value addition in the electronics sector.

Eligibility under Design Linked Incentive (DLI) Scheme

Financial incentives & design infrastructure support will be extended to domestic companies, MSMEs & start-ups involved in semiconductor design for ICs, SoCs, IP cores, etc., linked design under the Design Linked Incentive (DLI) Scheme.

  • MSMEs shall be outlined as per the Gazette Notification by Ministry of MSMEs dates June 2020 or extant norms;
  • Start-ups shall be defined as per the DPIIT notification dates Feb 2019 or extant norms;
  • Domestic companies shall be outlined as those which are owned by Indian Citizens as mentioned under the Policy Circular[1] of FDI of 2017 or extant norms. A company is deemed as owned by resident Indian Citizens if more than 50% of the capital in its beneficially owned by Indian Citizens and/or Indian companies, which are ultimately owned & controlled by resident Indian citizens;
  • The approved applicants or candidates that claim incentives under the Design Linked Incentive (DLI) Scheme shall retain the domestic status (more than 50% of the capital in it is beneficially owned by Indian Citizens or/and Indian companies which are ultimately owned & controlled by resident Indian Citizens) for 3 years after claiming incentives under the DLI Scheme;
  • Eligibility under Design Linked Incentive (DLI) Scheme shall not affect eligibility under any other Scheme and vice-versa.

Incentives under the Scheme

Financial incentives shall be given to approved applicants under the Design Linked Incentive (DLI) Scheme in the following manner:

  1. Deployment Linked Incentive: Incentive of 6% to 4% of net sales turnover 5 years subject to a ceiling of Rs. 30 crores per application will be given to consented applicants whose semiconductor design for ICs, Chipsets, Systems & IP Cores, SoCs, and semiconductor associated with designing are deployed in electronic products or items.
  2. Product Design Linked Incentive (PDLI): Reimbursement of up to 50% of the eligible expenditure subject to a maximum of Rs. 15 crores per application will be provided as financial or monetary  support to the approved or consented applicants who are engaged in semiconductor design for ICs, SoCs, Systems and IP Cores & semiconductor associated with designing that can be demonstrated in an operational environment and are set for volume production.
  3. Chip Design Infrastructure Support: C-DAC will establish the India Chip Centre to host the state-of-the-art design infrastructure (viz IP Cores, EDA Tools, and support for MPW (Multi-Project Wafer fabrication) and post-silicon validation and facilitate its access to supported companies.

Enhancement in the Manufacturing of Semiconductor

  • The sudden surge in demand for chips & semiconductor components has supported the requirement to set up a strong semiconductor ecosystem in India.
  • Several sectors are comprising auto, medical & telecom technology suffered due to the unexpected surge leading to the shortage of chips manufactured by only a few countries.
  • The beginning of new companies will aid in meeting the demand & supply and promote innovation in India.

Disbursement Process

  1. The financial support against the product development associated with the incentive component of the Design Linked Incentive (DLI) Scheme shall be released after the consent of the application and achievement of milestones as included in the consent letter.
  2. The claims for Deployment Linked Incentive (DLI) may be submitted after the end of each F.Y.
  3. Ministry of Electronics & Information Technology shall make financial provisions for disbursal of financial support and deployment associated incentive to consented projects under the Design Linked Incentive (DLI) Scheme. The disbursement shall be completed by CDAC based on approval/consent conditions. CDAC will submit financial necessity to Ministry as the consolidated amount on a regular basis and not on a project-by-project basis.

Conclusion

This century will be an era of the digital revolution, indicating the increased use of mobile phones and computer devices. This increased usage can be met only with the strong availability of semiconductor chips that endures their functioning. Hence, Indian needs to focus on the development of semiconductors to realise its digital potential and emerge as a superpower in the current era.

Read our Article:Market Intervention Price Scheme (MIPS) for Farmers: An Overview

Karan Singh

A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.

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