The Hindu Business Line : Chip makers will have to invest Rs 1,000 cr

Items covered
The items to be covered are silicon wafers, semiconductor wafers, solar cells, flat LCD/OLED/Plasma panel displays, storage media and other advanced micro and nano-technology products.

New Delhi , July 10

Semiconductor majors, including Intel, will have to invest at least Rs 1,000 crore within three years to avail themselves of the liberal sops proposed by the Union Government to kick-start domestic manufacture of chips and other micro and nano-technology devices.

The policy to promote investments in semiconductor fabrication and related microelectronic hardware — currently being firmed up by the Finance Ministry — has mooted a graded package of incentives linked to project ticket size, which is a minimum of Rs 1,000 crore or Rs 4,000 crore and above.

Further, there would be only a three-year window from the policy's inception date for investors to qualify for the concessions. "The idea is to attract big-ticket investments in the shortest possible time," officials told Business Line.

The items of manufacture to be covered under the policy are silicon wafers, semiconductor wafers, solar cells, flat LCD/OLED/Plasma panel displays, storage media and other advanced micro and nano-technology products.

Units with a minimum investment of Rs 4,000 crore are entitled to 100 per cent tax exemption on total profits for 10 years (seven years in case of Rs 1,000 crore and above) during the first 15 years and on ploughed back profits for the subsequent five years. This tax holiday is renewable for an extra 10 years in any additional investment.

For investors in these units, tax credit equal to 30 per cent of the investment value would be extended and deducted from their total tax liability.

Moreover, the above projects would receive special economic zone (SEZ) status if they are part of State-sponsored industrial parks such as Hyderabad's Fab City. Also, the five-year time limit to become Net Foreign Exchange (NFE) Positive, as per SEZ rules, will in this case be extended to 10 years. Sales to the domestic tariff area will be included in the NFE computation as exports for these 10 years.

Other big sop

The other big sop is lower excise duty on electronic goods made with components from units covered under the package. If an electronic product manufacturer uses material worth Rs 100, of which Rs 60 is sourced from the incentive units, the excise duty on the product would be 40 per cent of the normal excise duty. "This will ensure a ready domestic market for the units to be established," the officials added.

Over and above these, the proposed policy provides for the Centre investing up to 26 per cent of a project's equity in direct cash; and/or extending a five-year interest-free loan of up to Rs 400 crore; and/or a 10-year interest subsidy of 50 per cent of up to Rs 500 crore. For projects in the Rs 1,000-4,000 crore bracket, the interest-free loan and subsidy components have been pegged at Rs 100 crore each. However, the total Central support from all these cannot exceed 30 per cent of the project cost.

Incidentally, this is not the first time that fiscal sops are being given on the condition of a minimum sum being invested.