Centre unlikely to give incentives for technology transfer under ISM 2.0

India's semiconductor mission shifts focus as government plans to exclude technology transfer and land incentives under ISM 2.0

The Centre is unlikely to give incentives or fiscal support for technology transfer under the second phase of the ₹1.27 trillion India Semiconductor Mission (ISM), sources told Business Standard. 

The move marks a policy shift from the first phase of ISM, in which the government had proposed providing, as an incentive, a portion of the total fee that successful applicants were supposed to pay to their respective technology partners. 

“Based on the feedback from industry and the ISM advisory committee, it has been decided that we will not be giving that part as an incentive, as the calculation of a fair fee for technology transfer is a very complex issue,” a senior government official said.

Though the first phase of ISM had mentioned providing a portion of the total technology transfer fee as an incentive, none of the successful applicants was given the funds owing to the same reason, the government official said. He added that it has now been proposed to make it a part of the formal policy structure of ISM 2.0. 

The move will be detailed in the operational guidelines of ISM 2.0, which will be released within the next fortnight. Apart from this, the Centre is also likely to withdraw the option of providing incentives for land procurement to set up semiconductor fabrication, packaging, speciality chemicals and gases, equipment or other units. This is because it wants the respective state governments where these plants will be set up to take the lead, another official said. 

“The availability of land and how much to allocate to a particular manufacturing unit is a state prerogative. So, we will stay clear of it as a matter of policy,” the official said. 

For example, for the ₹91,000 crore Dholera (Gujarat) semiconductor chip fabrication unit being set up by the Tata Group, the total cost of the acquired land for the project was around ₹195 crore. Of this, the Centre paid around ₹46 crore, according to internal documents of the IT ministry. Business Standard has seen a copy of these documents. 

In comparison, while the tech transfer fee that the Tata Group paid to Taiwan’s Powerchip Semiconductor Corporation was around ₹7,728 crore, the Centre did not subsidise any part of it, according to the documents. On Wednesday, the Union Cabinet approved the second phase of ISM, with a special focus on inviting design, materials, equipment and speciality chemical makers to set up shop in the country. 

As in ISM 1.0, the incentives under the second phase will also be awarded on a pari passu basis to the successful applicants. 

Policy change

 

• Move marks a policy shift from the first phase of ISM
• Government had proposed providing a portion of the total fee that successful applicants were supposed to pay to their respective technology partners
• Incentive not to be given as the calculation of a fair fee for technology transfer is a very complex issue, said government official
• Centre also likely to withdraw incentives for land procurement to set up semiconductor fabrication, packaging, speciality chemicals and gases