The Hindu Business Line : New semi-conductor policy has place for only 2-3 fabrication units

New Delhi March 22 The Government has decided to allow only two or three companies to set up fabrication units in India with incentives specified under the semi-conductor policy.

However, it will permit ten companies to take benefit of the fiscal measures for manufacturing devices that include Liquid Crystal Displays (LCD), solar cells and storage devices, which essentially form part of the eco-system.

An Appraisal Committee comprising high-level officials from the Department of Information Technology and the Ministry of Commerce and Finance will decide on which companies will be given the incentives.

Notifying the semi-conductor policy, which was cleared by the Union Cabinet in January, Mr Dayanidhi Maran, Union Minister for Communication, Information and Technology, said, "We expect to attract investment of Rs 24,000 crore in this sector in the next three years. We are sure that many big players are willing to invest. Since we have the capacity for 2-3 fabrication units, we will have the choice to pick the best."

To avail themselves of the incentives, companies would have to approach the appraisal committee. He said that the Government was trying to get new technology and this would mean a fabrication unit for 90 nano metres.

Intel prospects

Commenting on the prospect of Intel reconsidering its decision to invest in India, Mr Maran said, " In December 2005, Intel said that it would renegotiate with India. Since the policy is notified today, I will personally write to Intel and other stakeholders to invest in India."

As per the special incentive package, the Government would provide an incentive of 20 per cent of the capital expenditure during the first ten years for units in SEZ. However, in the non-SEZ units, the incentives would be 25 per cent of the capital expenditure.

These incentives would be over and above what would be offered by the State Governments. The incentives would be subject to a threshold investment of Net Presence Value (NPV) of Rs 2,500 crore for manufacturing fabrication units and Rs 1,000 crore and above to manufacture other eco-system products.

The threshold value shall be taken as NPV of the investments made during the first ten years of the project and the discount rate will be nine per cent. Companies would have the choice to decide whether they want incentives in the form of equity participation or capital subsidy in the form of investment grant and interest subsidy.

Although the deadline for the investments is March 31, 2010, Mr Maran felt that the expected investment would flow this year itself.