PSUs funding
The association is also seeking a larger role for Indian public sector undertakings in funding of semiconductor manufacturing projects in the country. Since PSUs have large funds, the move will offer corporate tax-breaks on the ir investments.

Moumita Bakshi Chatterjee

New Delhi, Feb 24

At a time when the virtually non-existent semiconductor manufacturing market in India is showing signs of taking off in a big way, the India Semiconductor Association has approached the Government with a set of recommendations to encourage the industry, including a proposal for tax breaks to investors in mega projects.

"The Government policies should encourage investments in semiconductor ventures by offering tax breaks," Mr Rajendra Khare, Chairman of India Semiconductor Association (ISA), told

Business Line

.

He suggested that for every $100 invested in semiconductor projects, offering $30 worth of tax credit for adjustment against other tax liabilities could make it attractive for investors in these capital intensive projects.

ROLE FOR PSUS

ISA is also seeking a larger role for Indian public sector undertakings in funding of semiconductor manufacturing projects in the country.

"Large public sector companies have huge reserves and funding semiconductors ventures could be an avenue for investment. Such a move would not only ensure that the funds do not sit idle, but will also offer corporate income-tax breaks on these investments," he said.

ISA has also made a pitch for encouraging domestic value addition, by suggesting tax breaks in local indirect taxes. "We have proposed excise duty waiver on domestic value addition in products that use chips. This would encourage end box manufacturers to get components or chips sourced from the domestic market," he said.

ISA has been in discussions with the Government on these issues for the last several weeks and hopes that the issues are addressed in the Budget announcements, next week.

"Unless the proposed measures are put on a fast track, India could lose a major opportunity in semiconductor manufacturing," he said.

SEEKS 10,000-CR FUND

In addition, the ISA has also asked the Government to create Rs 10,000 crore fund, for participating in creating Fab city infrastructures over the next 3-5 years. "The Government could participate in these projects by bringing in 26 per cent as equity, while the investors could bring in the balance amount. The Government could dip into the fund to participate in such mega projects," he said.

ISA's wish-list comes in the backdrop of an ambitious semiconductor project announced by SemIndia recently. SemIndia has said that a special purpose vehicle (SPV) would be created shortly and the role of developer of the project would be transferred to it within 45 days.

In the first phase, the project will have two components - a $75-million test and assembly line and a fab.

(This article was published in the Business Line print edition dated February 25, 2006)
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