Intel's $700-mn India project faces trouble

There seem to be hiccups on the way towards setting up Intel's proposed $700-million wafer testing facility in India as the government appears reluctant to meet some of the demands raised by the world's largest chipmaker.

Apart from flexibilities on external commercial borrowings and tax benefits, Intel had asked the government to make an upfront payment of $100 million, officials told Business Standard today.

But the government is not ready to make this kind of a contribution. A team from Intel negotiated the terms of a deal with officials last week but a breakthrough could not be achieved, officials said.

In response to an e-mailed questionnaire, Intel Spokesperson Chuck Mulloy said, "We have teams exploring sites worldwide on an ongoing basis. We do not comment on their activities unless we have reached an agreement and announced an agreement." He also declined to comment if Intel had asked the Indian government for an upfront payment.

"I can't answer this because we won't confirm or deny that we have met with the government," Mulloy said. But he said Intel sought incentives from regions where it made "significant capital investments".

Intel's investment proposal was being pursued by the Prime Minister's Office which had asked for the finance ministry's comments on the sops sought by the chipmaker. The negotiations were also being handled by the Prime Minister's Office.

After his visit to the US last month, Communications and Information Technology Minister Dayanidhi Maran had said that he had convinced Intel to set up a $400 million facility in India. But Intel denied this saying no decision had been taken.

Officials said tax benefits sought by the California-headquartered company and unlimited access to external commercial borrowings facility were available in special economic zones.

Intel has identified special economic zones near Chennai and Greater Noida as possible investment sites.