Chip makers to get equity prop

Up to 15% stock support; all projects to be declared SEZs.

In a move that will boost the fledgling semiconductor and nano technology sector, the government is finalising plans to provide equity support of up to 15 per cent of the total project equity, and subordinate loans amounting to 5 per cent of the project cost at government securities rates to companies that set up manufacturing facilities in the country.

The project cost of a typical semiconductor fabrication utility works out to Rs 4,000 crore, and the policy package will come as a boost for projects like SemIndia's "" which has announced an investment of $3 billion for setting up a semiconductor fab plant at Hyderabad. Global giants like Intel and Texas Instruments are also looking at major investments in manufacturing of chip.

The government has already said the India Infrastructure Finance Company will take equity stakes in new semiconductor plants. The incentive package is likely to grant all such projects special economic zone status.

In addition, these projects may be provided 100 per cent depreciation in the year of investment into the project, while the excise duty paid on inputs is likely to be made cenvatable against excise duty paid on final products like wafers and semiconductors. Such units will also continue to enjoy import of raw materials and capital goods at zero customs duty.

The equity participation will be decided keeping each project in mind. The government will also retain an exit option that can be exercised at a suitable point of time after a project goes on stream. The loans will have to be repaid in five equal instalments after the principal amount has been fully repaid.

The draft policy on investments for setting up semiconductor (chip-making), and micro and nano-technology manufacturing industries in India is likely to be finalised soon. The finance ministry has sought a case-by-case approval for each project through an inter-ministerial committee.

The department of information technology has been working on a policy for setting up of state-of-the-art semiconductor fabrication units for some time now.

In fact, the department had earlier sought equity infusion of up to 26 per cent of the project cost. It had also sought a loan of Rs 100 crore at zero interest for five years, and Rs 400 crore if the project cost exceeded Rs 4,000 crore.