Karnataka’s ESDM Incentives 2025-30: What OEMs and MSMEs Need to Know

The Government of Karnataka (GoK) is steadily positioning the state as a premier hub for clean mobility, advanced electronics, digital technologies, and life sciences. A strong combination of policies for Electric Vehicles (EVs), Electronic System Design & Manufacturing (ESDM), Information Technology (IT), and Biotechnology (BT) is creating a cohesive, future-ready ecosystem. Together, these frameworks enable enterprises to design projects that qualify for multiple incentive streams, while specialised financing platforms help ease the working-capital pressure between investment and incentive realisation.

Combined Industrial Policy Opportunities for MSMEs

Karnataka’s draft Industrial Policy 2025–30 unlocks double benefiting opportunities for MSMEs by stacking incentives with EV Policy 2.0 (2023, 2025 updates) and extended ESDM schemes. This creates a powerful framework for EV supply chain localisation in Karnataka targeting high-demand components like battery packs, power electronics, and charging modules.

Key Combined Incentives for Karnataka EV MSMEs

1. Capital & Land Subsidy Stacking (40–60% Capex Reduction)

• Industrial Policy 2025-30: 50% land reimbursement (max ₹50 crore)
  
• EV Policy Karnataka: 25-30% capital subsidy on plant/machinery (up to ₹100 crore for greenfield units)
  
• Best for: MSMEs in Bengaluru-Tumakuru EV Corridor or notified clusters
  

2. Production-Linked Turnover Cashback (Up to 7 Years)

• Industrial Policy: 5-10% cashback on ESDM/EV turnover
  
• EV Policy + Central PLI: ₹10-20 crore performance grants + 4-6% on incremental sales
  
• Real Example: MSME making EV enclosures claims ₹5 crore combined reimbursements on ₹100 crore turnover
  

3. Green Manufacturing & Skill Development Rewards

• Industrial Policy: 20% extra subsidy for energy-efficient EV production
  
• EV Policy: 40% rebates on charging infrastructure installation
  
• Skill Boost: ₹1-2 crore per 100 jobs (IATF-16949, battery tech training)
  

4. TReDS to Bridge Incentive Gaps

• DTX by KredX: 80-90% instant advance on OEM receivables (Ola Electric, Ather)
  
• TReDS-regulated: Supported 500+ Karnataka MSMEs in 2025 at 10-15% lower costs vs. bank loans
  
• Funds capex while awaiting incentives (12-24 month disbursal).

Incentives that shape the supply base

The policy seeks to accelerate EV penetration across public transport, corporate fleets, and private ownership, while channeling investments into EVs, batteries, charging infrastructure, and allied components.

For MSMEs, this opens three clear opportunity zones:

• Component and sub‑assembly supply to EV OEMs and Tier‑1s (harnesses, enclosures, electronics, plastics, sheet metal, telematics hardware).
  
• Services and maintenance ecosystems, including charging‑infra installation, repair, aftermarket parts, and retrofitting.
  
• Localisation of imported parts, where OEMs prefer nearby, reliable vendors that can meet quality and delivery timelines.

By aligning capabilities with OEM demand (quality certifications, just‑in‑time deliveries, cost competitiveness), MSMEs can embed themselves early in fast‑expanding EV supply chains.

For businesses, this translates into:

• A compelling opportunity to set up EV and energy-storage manufacturing units in a state with deep automotive, semiconductor-design, and technology capabilities.
  
• Policy support for charging networks and complementary industrial benefits that help bring down the lifecycle cost of owning and operating EV assets.

IT and biotech policies: Adding Value To The Supply Chain

Complementing the EV agenda, Karnataka’s Special Incentives Scheme for the ESDM sector (2020–2025, extended into 2025–30) was crafted to attract electronics manufacturers and component suppliers, including those catering to the EV ecosystem. The scheme applies to both greenfield units and expansion or diversification projects, and is structured so that eligible companies can combine state-level incentives with central government programmes such as Production Linked Incentive (PLI) schemes.

Building on this base, the proposed Industrial Policy 2025–30 continues to position ESDM and future mobility as core pillars of Karnataka’s growth roadmap. The emerging framework focuses on capital subsidies, production-linked benefits, and targeted support for green, energy-efficient manufacturing.

For EV and ESDM units, the new policy era offers:

• The ability to stack central and state-level support by combining capital subsidies on land, plant, and machinery with turnover-linked incentives over multiple years.
  
• Additional rewards for sustainable practices such as energy-efficient processes, renewable-energy usage, and greener factories, which are increasingly essential for integration into global supply chains.

The Cash-flow Challenge behind Policy

Despite this favourable policy environment, most EV, ESDM, IT, and biotech incentives are backend loaded. Benefits are typically released only after the enterprise meets milestones such as project completion, commencement of commercial production, job creation, or achieving specified turnover levels. The lag between capital deployment and incentive disbursal can create significant working-capital strain, especially for MSME vendors and Tier 1 or Tier 2 suppliers scaling up to service new orders.

In practice, manufacturers and suppliers often face:

• Long payment cycles from large buyers and OEMs, with receivables tied up for extended periods and putting pressure on daily liquidity.
  
• Substantial upfront spends on land, plant, raw materials, tooling, people, and technology long before incentives or subsidies actually arrive.

Action Steps for MSMEs

• Register on KiADB single-window portal by Q1 2026 to pre-qualify for dual EV-industrial policy benefits. Prioritise EV clusters in Chikkaballapur and Kalaburagi for maximum stacking eligibility.​
• Onboard DTX by KredX, an RBI regulated TReDS platform for ESDM/EV suppliers via  DTX ESDM Seller Portal  to unlock 80-90% discounting on receivables from OEMs like Ola Electric/Ather. Get instant liquidity for capex while awaiting stacked incentives tailored for Karnataka ESDM firms with TReDS compliance.​
• Next: Align projects with policy milestones, then integrate DTX funding into your cash-flow roadmap for seamless growth.

How KredX DTX supports on funding the Incentive Gap

This is where the Domestic Trade Exchange (DTX) by KredX play a critical role in enabling Karnataka’s EV, ESDM, IT, and biotech ambitions. By unlocking capital tied up in trade receivables, KredX helps OEMs, Tier 1s, technology service providers, and MSME suppliers maintain liquidity and fund growth without waiting for incentive disbursals or delayed customer payments.

Through digital invoice discounting and structured supply-chain finance on the KredX DTX platform, businesses gain:

• Faster access to cash for MSME suppliers selling to large OEMs, IT and engineering buyers, and anchor corporates, allowing them to ramp up production or service delivery without cash-flow disruptions.
  
• A transparent, technology-driven marketplace where banks, NBFCs, and other financiers can bid for invoices, helping enterprises optimise cost of funds, diversify lenders, and improve overall capital efficiency.

For policy makers and ecosystem anchors, such receivable-backed funding rails complement the state’s incentive architecture, ensuring that liquidity does not become a bottleneck between policy announcement and on-ground execution.

Turning policy into growth: what businesses should do next

To convert Karnataka’s integrated policy intent into tangible growth, enterprises can:

• Align capex, R&D, and digital-transformation plans with EV, ESDM, IT, and biotech eligibility criteria at the project-design stage, so that location, product mix, and investment phasing support multi-policy qualification.
  
• Build a clear cash-flow roadmap that forecasts when various subsidies, reimbursements, and performance-linked benefits are likely to be received, and quantifies the working-capital requirement in each phase.
  
• Embed receivable-backed funding through platforms such as KredX DTX into treasury and risk-management strategies, treating it as a steady, programmatic part of the capital stack rather than an ad-hoc fallback.
  

With EV, ESDM, IT, and biotech policies reinforcing one another, Karnataka has laid the foundation for a powerful, multi-sector transformation. Backed by the right financial infrastructure from DTX by KredX, manufacturers, tech firms, and their MSME partners can turn this policy opportunity into scalable, sustainable growth while monetising incentives faster and building globally competitive supply chains from the state.

Strengthening the digital backbone

Karnataka’s leadership in IT and biotechnology further reinforces this manufacturing push. The state’s IT policy promotes high-value digital capabilities such as embedded systems, AI, analytics, and cloud services, that are directly relevant to EVs, ESDM, and Industry 4.0 operations. In parallel, the Biotechnology policy positions Karnataka as a preferred destination for biotech research, biopharma, and med-tech, increasingly intersecting with electronics, sensors, and data platforms. For advanced manufacturers, this opens up:

• Collaboration opportunities in health-tech, bio-sensors, diagnostics, and clean-tech, where biotech converges with electronics and data.
  
• Access to R&D support, incubation infrastructure, and potential fiscal incentives for taking lab innovations to commercial scale.

Together, the IT and biotech policies provide a strong digital and research backbone to the EV and ESDM ecosystem, making Karnataka an end-to-end base for both hardware and software-led manufacturing.