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25% concession on capex for the semiconductor biz on the cards

The government has restructured its existing 2007 semiconductor policy with fresh guidelines and is expected to shortly come up with a newly amended policy

Sanjay Singh | April 5, 2011 | Updated 11:19 IST

The government has restructured its existing 2007 semiconductor policy with fresh guidelines and is expected to shortly come up with a newly amended policy, which would offer special fiscal incentives for India's semiconductor industry with concessions up to 25 per cent to keep the sector on the growth path.

The sector is expected to reach the Rs 47,500 crore ($10.2 billion) size by 2012.

"We have restructured our semiconductor policy and it is ready to be launched soon.

We would also offer 20-25 per cent concession in capital expenditure to the sector," Union minister for communications and information technology, Kapil Sibal said at the Electronics & Information Technology Exposition (ELITEX-2011) organised by the department of information technology (DIT).

The incentives are not new for the sector as similar concessions were announced when the new semiconductor policy was announced in 2007.

But the government hopes to ride high on robust economic growth as well as the willingness of firms to invest in the sector.

In 2007, industry had said that the government incentives (20-25 per cent of capital expenditure) was too low in view of the investment requirement in billions of dollars. It cited the cases of countries, such as China and Taiwan, where incentives are close to 50 per cent. As a result, companies, which had proposed to set up units to manufacture semiconductors, solar cells and other advanced technology products under the Indian semiconductor policy, received cold response from investors then.

However, officials now feel that the revamped semiconductor policy would give a boost to the sector. "We have a booming market now. With the same kind of incentives for the sector, we do not expect the situation like earlier," said a DIT official.

In February 2007, the government had announced its muchawaited semiconductor policy for India. Post-announcement of the policy, the DIT had received 26 project proposals involving a total investment of Rs 2.29 lakh crore under its Special Incentive Package Scheme (SIPS), which aimed to help companies set up semiconductor manufacturing plants.

According to officials, under the terms of the incentives only six proposals were able to demonstrate financial viability.

Companies like Moser Baer Photovoltaic Ltd, Tata BP Solar India Ltd, Sterlite Industries India Ltd, KSK Surya Photovoltaic Venture and PV Technologies India Ltd had proposed setting up units under the scheme. Other proposals submitted were for an LCD project by Videocon Industries and another for a semiconductor chip project by Reliance Industries Limited (RIL).

The government had then offered them 20-25 per cent concession for capital expenditure of the projects under SIPS. Soon thereafter, the global economic downturn hit the markets and the policy yielded little towards growth of the industry.

Ganesh Ramamoorthy, principal research analyst at Gartner said India is a consumer in the global semiconductor market.

Consumption of semiconductors is growing in the country and is slated to touch the $6-billion mark by 2014. But India still accounts for a tiny part of the global market size of nearly $300 billion.

As a result, both investors and semiconductor vendors have stayed back from getting into direct investment or even enter into partnerships with Indian companies. Even where global companies have partnered it is only at the technology level.

Courtesy: Mail Today 

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