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Union Budget likely to boost semiconductor fabrication in India

According to reports, the Union Budget 2011 might have some good news for the Indian information technology hardware industry. The threshold limit of investment may come down for setting up semiconductor fabrication plants in India, said sources in the industry.

According to sources in the Department of Information Technology (DIT), the government is planning to annonce a revised policy in the Budget session. DIT had called for recommendations from various bodies relating to the semiconductor business, including the Manufacturers’ Association of Information Technology, Indian Semiconductor Association (ISA), Electronic Industries Association of India (ELCINA) and Software Technology Parks of India (STPI), among others, for drawing the draft of a new Special Incentive Package Scheme (SIPS).

SIPS-1 was announced by the Union government in 2007 as part of the Semiconductor Policy to boost the semiconductor manufacturing sector. In SIPS-I, the minimum amount of such investments for a fab unit was around Rs 2,500 crore and Rs 1,000 crore for ecosystem units.

The Indian government defines ‘fab unit’ as a semiconductor wafer fabrication facility and eco-system also includes the manufacture of semiconductors like LCD, OLED, storage devices, solar cells, etc. In the proposed SIPS-II, industry bodies want a reduction in the threshold limit for investments in high-tech manufacturing.

SIPS-1, which ended on March 31, 2010, attracted 26 proposals, worth $51.7 billion (Rs 2.3 lakh crore).

Poornima Shenoy, president, ISA, said, “The government should minimise the threshold for manufacturing units in SIPS-II. It is not practical for small companies to invest such huge sums. We expect the recommendations given by us in this regard to be considered. The government should come out with an investment-friendly policy to invite foreign companies to come and set up operations in India.”

In the recommendation, ELCINA and STPI has asked for a subsidy for manufacturing units and also for creating hardware manufacturing clusters across locations. Sources say SIPS-II will provide a subsidy similar to SIPS-1 for manufacturing units in special economic zones and outside.

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