The Hindu Business Line : Chip fabrication companies to get fiscal incentives

The preconditions
Cos to invest atleast Rs 2,500 cr for setting up fab unit to avail incentives
For plasma display manufacture etc, cos need to invest at least Rs 1,000 cr SEZs to get 20% incentive
Others to get 25% rebate on capital expenditure

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New Delhi Feb. 22 In a move aimed at making the country a hub for semiconductor manufacturing, the Government on Thursday announced its decision to give incentives of up to 25 per cent of the capital expenditure incurred by chip fabrication companies for the first ten years.

The incentive could either be in the form of equity participation from the government, tax breaks or interest-free loans. The policy will benefit global companies such as Intel, AMD, SemIndia and a host of other companies who have plans to set up chip manufacturing units in India.

"The country can safely expect over $10 billion of investment. A typical fab requires a minimum $3 billion investment.

"Our country has the eco-system to take 2-3 such fabs," said Mr Dayanidhi Maran, Union Minister for Communication, Information and Technology.

Pre-conditions

The policy could result in cheaper mobile handsets, electronic goods and enable high-end features in automobiles.

To avail themselves of the incentives, the companies would have to invest at least Rs 2,500 crore to set up a fab unit. For manufacturing other products such as plasma display panels, liquid crystal displays and other advanced micro and nano-technology products, the companies will have to make a minimum investment of Rs 1,000 crore.

The manufacturers setting up plants in an SEZ will get 20 per cent incentive and others will get a 25 per cent rebate on the capital expenditure.

Manufacturers will have to set up their units in the country before 2010 to avail themselves of the benefits.

These measures could cost the Government up to $2 billion over the next three years.

Ms Poornima Shenoy, President of Indian Semiconductor Association, said, "The policy will provide an impetus to the domestic electronics goods market which is expected to reach $363 billion by 2015.

"Domestic demand for the semiconductors alone would be $36 billion."

Mr Vinnie Mehta, Executive Director of MAIT, said, "With growing consumption of IT and consumer electronics, India is now ready for semiconductor production. The policy will enable prototyping and market testing for new products."

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