Chipmakers to get sops, tax breaks in new policy

Semiconductor manufacturing facilities with an investment of at least $1 billion in India will be entitled to financial support from the government either in the form of equity support or concessional loans.

This proposal, one of the many in the draft semiconductor policy prepared by the department of information technology, also provides for a 15-year tax break to manufacturers. While the tax exemptions will be 100 per cent for the first ten years, they will be extended for another five years if the units plough back profits.

"The draft policy on semiconductors has been finalised by the department of IT and will soon be sent to a high-powered committee of several ministries. The proposed policy allows manufacturers to avail of government support only after they provide a minimum support of $1 billion for wafer testing plants," a senior government official told Business Standard.

Under the draft policy, a fund will be created to provide support to units manufacturing semi-conductors, along with LCD monitors and storage devices.

"The fund will be part of a special purpose vehicle (SPA) that will be created to provide equity support and viability gap funding to these ventures for a period of three years," the official said.

The draft policy also aims to ensure procedural simplification for units planning to set up base in India. The proposed policy framework, which is based broadly on the policy adopted by Taiwan and China, will allow support for only state-of-the-art technology.

"The idea is to promote India as a technology hub and the assistance provided by the government will only be for wafer testing plants," the official added.

In the absence of a proper policy framework, India does not have any fabrication facility, while Taiwan has about 40 chip manufacturing plants and China 39 fabrication facilities.