Subsidies for semi-conductors

BS reports

In a move that is perceived as a partial victory for the high-tech manufacturing sector in India and expected to attract investments of over $10 billion, besides generating employment, the central government has announced a host of incentives in its much-awaited semiconductor policy, to buoy the semiconductor ecosystem.

The government will bear 20 per cent of the capital expenditure in the first 10 years if a unit is located inside Special Economic Zones (SEZs) and 25 per cent in case of other units. The countervailing duty (CVD) on capital goods would also be exempted in case of units outside SEZs.

For semiconductor manufacturing (wafer fabs) plants, the threshold Net Present Value (NPV) of investments would be Rs 2,500 crore and the NPV of investments for manufacturing other products would be Rs 1,000 crore.

Assuming the projects have a 1:1 debt to equity ratio, the government is likely to restrict its participation to around 26 per cent of the equity.

The remaining “will be in the form of interest-free loans, tax subsidies, and concessions,” according to Union Minister for IT and Communications Dayanidhi Maran, who announced the semiconductor policy here today.

“It is up to state governments to provide additional incentives,” he added.