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New Semiconductor policy with 25% concession on capex likely to boost Solar manufacturing in India

Special Incentive Package Scheme-1 (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).

Panchabuta had mentioned earlier this year in February that 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 announce 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).

According to this report,  Union minister for communications and information technology, Kapil Sibal said,”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. ”

According to the report, 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.

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