The Hindu Business Line : Cabinet likely to discuss sops for chip sector today

The much-waited semiconductor policy is likely to be put up before the Union Cabinet on Thursday. Without elaborating on the details, the Minister for Information, Communication and Technology, Mr Dayanidhi Maran, on Wednesday said that for the details of the policy "You will have to wait till it is presented to the Cabinet."

As per the proposed policy, the Government is planning to provide 25 per cent incentive on the capital expenditure incurred by the semiconductor industry during the first ten years.

However, this incentive would be applicable if a minimum investment of Rs 2,500 crore is made. Further, the Government had also been contemplating equity participation of 26 per cent in some of these projects amongst certain other incentives.

Incentive Package

However, there were differences between the Finance and IT Ministries on the incentive package. This had raised concerns from the industry on the lack of clarity on the policy, impacting investments in the sector.

"While the policy was to be announced in the last Budget, the fact that the Government is still not clear on the kind of incentives it wants to offer the industry is impacting investments in this sector," said Mr Vinnie Mehta, Executive Director, Manufacturing Association of Information Technology (MAIT).

The differences within the Government over formulating a concrete package for the semiconductor business may have delayed the entry of several foreign companies into India.

For instance, Taiwanese semiconductor companies had been waiting for two years to get their investments approved in China and had India had a semiconductor policy in place, some of these units may have come here. However, some of these companies got approval to invest $825 million in China, but there are other Taiwanese companies still looking at India as a base.

Recently, a delegation of Taiwanese semiconductor companies had met the Indian Semiconductor Association (ISA) in Bangalore.

Cluster Industry

Though ISA declined to comment on the issue, Mr Thomas Chang, Director, Taipei World Trade Centre, said: "May be it is time for Taiwanese semiconductor companies to come to India. But China does indeed offer excellent human resources and hi-tech environment and infrastructure, which beckons the Taiwanese to invest there. The other most important factor is the development of allied cluster industry. Taiwanese semi-conductor companies are easily able to source the required raw materials and services from the allied cluster industry, which is established in the industrial area/estate, and thus are able to generate a quick turnaround to supply to their respective customers."

He cited the example of a hi-tech and allied cluster being developed at Sriperumbudur near Chennai with Foxcomm, Nokia and other giants establishing facilities close to each other. "In case the Government encourages and provides a few more clusters such as Sriperumbudur in India, it would surely attract Taiwanese investors, even if the Government were to shy away from offering any incentives," Mr Chang said.