Cabinet to take up fab units' proposal on Thursday

Each proposals entails investment of $4-5 billion, involves Jaypee group, IBM, HSMC and STMicroelectronics

The Centre’s bid to subsidise two semi-conductor chip fabrication units, or fabs, in India is expected to come up for approval in the next Cabinet meeting,  likely to be held on Thursday. The government had invited proposals to set up fabs in the country almost two and a half years ago to give a push to domestic manufacturing.

The two fab projects entailing an investment of $4-5 billion each, were short-listed from around 30 such applications received by an empowered committee, comprising Sam Pitroda, adviser to the Prime Minister, and V Krishnamurthy, chairman of the National Manufacturing Competitiveness Council, among others. While one of the project consortiums is led by Jaypee Group, which has IBM as technology partner, the other is from Hindustan Semiconductor Manufacturing Corporation, which has Geneva-based STMicroelectronics NV as technology partner.

The proposals had run into rough weather as the Planning Commission was reportedly against giving such large-scale subsidy when the country is battling a grave fiscal deficit issue. While officials in the Department of Electronics and Information Technology, which is driving the project refused, to comment on the matter, an industry official familiar with the project discussion said the government had last consulted the firms involved the consortiums in February this year.

The official, who did not wish to be identified due to the sensitivity of the matter, added that although there is no clarity on what is the final subsidy that will be approved by the government, the objection by the Planning Commission seems to have been nullified.

The official said that the government had earlier asked the consortiums to upgrade the technology already done, even though the project cost would go up. “They also wanted a solid commitment from the technology partner towards the project which has also been provided.”

Identifying the increasing imports of electronic goods into the country as a significant area of concern, the government has unveiled a series of policies to incentivise investment in electronics manufacturing sector under the National Electronics Policy 2011. According to government estimates, India’s electronics import Bill will soon exceed that of oil.

In July last year, the Cabinet had approved Rs10,000 crore of incentives for manufacturing electronics products and components under the Modified Special Incentive Package Scheme (M-SIPS). Under M-SIPS, companies that invest special economic zones (SEZs) get 20 per cent subsidy on capital expenditure, while those operating out of SEZs will get 25 per cent support.

Companies which have proposed to set up fabs will get the incentives under M-SIPS along with some additional benefits.