Centre to help only first few fab units

Finance ministry likely to go back on its three-year blanket incentive offer

The Union finance ministry is understood to have decided to limit its equity participation and other incentives to less than half-a-dozen fab units on the first-come-first-serve basis instead of the blanket offer it had made during the last Budget.

According to sources close to the development, the ministry is in no mood to implement the three-year blanket offer of equity participation and other incentives since it feels that the financial commitment would be enormous if these facilities are extended to all the units coming up in this period.

"Instead, the ministry is planning to limit the incentive package to less than half-a-dozen units," sources told Business Standard.

The policy framework prepared by the Union IT ministry for the purpose of promoting the semiconductor industry in the country has been under examination of the finance ministry for quite some time now.

The draft policy has recommended 26 per cent equity participation or zero per cent interest on investments of up to Rs 400 crore or 50 per cent interest rebate to an extent of Rs 500 crore.

It has also recommended to extend incentives to a few more products other than chip manufacturing units.

The draft policy also proposes to extend all the incentives available under the SEZ Act apart from tax exemption on domestic marketing of the products to be manufactured by Fab units.

The IT ministry has also asked the finance ministry to enhance the time period for the units to become net foreign exchange positive (NFEP) to 10 years from the existing five years owing to longer gestation and higher initial investments required by semiconductor manufacturing operations.

Sources said the Union IT ministry had also proposed to extend all the above incentives, including equity holding by the Centre, to the manufacturing of flat LCD panels, plasma televisions, and storage devices.

When contacted, C S Rao, IT advisor to the government of Andhra Pradesh and CEO of APInvest, which has been acting as the nodal agency for the two fab projects proposed by SemIndia and Nanotech Silicon India Limited in Hyderabad, said the semiconductor policy was expected to be announced in a few weeks' time.

When asked about the reported change in the government's policy concerning the incentives to fab units, he said that AP projects were at a very advanced stage of planning and would get the Centre's support irrespective of the finance ministry's rethinking on the blanket offer.