Intel puts unit on hold as govt declines sops

Move follows government's inability to grant tax concessions for 15yrs.

Computer chip maker Intel has put off plans to set up a wafer-testing facility in India after the government expressed its inability to grant tax concessions to the company for a 15-year period.

"The company conveyed to the government last week that it would not be able to make the investment as the project would not be viable without the tax concessions. The company, however, said it would explore opportunities in the future," an official told Business Standard.

Intel had sought tax concessions from the government before investing $700 million in a wafer-testing facility in the country. The concessions Intel sought included unlimited access to external commercial borrowings, tax waivers and an upfront payment of $100 million.

Officials said the view in the government was that providing concessions over and above those available in special economic zones could set a precedent for other foreign companies.

There is also a view that the concessions sought are not commensurate with the level of activity that will take place at the proposed Intel facility.

This, because the process does not involve a high level of value-addition.

Intel recently announced that it was setting up a facility in Israel. Officials said Intel's decision did not reflect adversely on India's investment climate. "If the volumes are there, companies will themselves be interested," said an official.

Intel had identified a special economic zone near Chennai and one at Greater Noida as possible sites for setting up the facility which was expected to be spread over 125-150 acres.

The investment was to be made in four phases. Intel was to invest $250 million for the first phase, and $150 million each for the remaining three phases.

Wafers are used in industrial power controls, elevators, thermometers, low-end consumer electronics and communications devices.

The Intel India Development Centre in Bangalore is the company's largest non-manufacturing set up outside the US.