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Norms for fiscal package on chip making issued

NEW DELHI: The Central Government on Friday issued guidelines for the special incentive package to set up semiconductor fabrication and other micro and nanotechnology industries in India, a move that will encourage multinationals such as SemIndia to finalise their investment plans.

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

The guidelines, which operationalises the policy, comes days after the world’s largest chipmaker, Intel, blamed government delays for its decision to overlook India for setting up a chip manufacturing unit.

The semiconductor policy, announced in March, is aimed at creating a high-tech manufacturing sector in India and is expected to attract investments of over $10 billion.

An Appraisal Committee, headed by Additional Secretary in the Department of Information Technology (DIT), has been constituted, an official release said.

For semiconductor manufacturing (wafer fabs) plants, the threshold Net Present Value (NPV) of investments would be Rs. 2,500 crore and the NPV of investments for manufacturing other products would be Rs. 1,000 crore. Assuming the projects have a 1:1 debt to equity ratio, the government is likely to restrict its participation to around 26 per cent of the equity.

The policy covers LCDs, plasmas, storage devices, solar cells, photo-voltaics and nanotechnology products and includes assembly and testing of these products. The deadline for the investments is March 31, 2010.

The threshold value would be taken as NPV of 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.

As per the guidelines, an investor will submit a proposal to the Appraisal Committee along with the feasibility report.

Poornima Shenoy, President of the Indian Semiconductor Association (ISA), said: “The coming out of guidelines is an extremely positive news but we have to see the details before commenting.” — PTI

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