In a big boost to the Indian electronics industry, Cabinet today approved setting up of two semiconductor units entailing investments of Rs 51,550 crore.
India does not have a semiconductor plant and two consortia - one led by Jaiprakash Associates and the other by Hindustan Semiconductor - have proposed to set up units in the country.
"Cabinet today approved setting up of two semiconductor facilities. We will now prepare a detailed project report and issue letter of intent to participants," DEITY Secretary J Satyanarayana told PTI.
In September, the Cabinet had given in-principle approval to the projects and had asked the IT ministry to give open offer to all the companies interested in setting up the plants and approach the Cabinet again for final approval.
The Department of Electronics and IT invited bids for the plants detailing the benefits that the companies would get, but no new companies showed up except the two consortia which were already in the fray.
Semiconductor is the main hardware component that is key to the functioning of devices such as mobiles and computers as well as hi-tech defence equipment.
The consortium led by JP Associates, which includes IBM Microelectronics and the systems integrator Tower Jazz, has outlay of about Rs 26,300 crore for the fab, as per DEITY.
The unit led by Hindustan Semiconductor Manufacturing Corporation (HSMC) along with France-based ST Microelectronics and Silterra (Malaysia), entails investment of about Rs 25,250 crore.
These companies will get all benefits mentioned under the National Policy on Electronics like Modified Special Incentive Package which allows up to Rs 10,000 crore in benefits under the 12th Five Year Plan ending 2017.
The companies will get benefit under section 35 AD of I-T Act which means capital investment amount will be set off against profit.
Besides, these projects will be given interest free loan of about Rs 5,124 crore for 10 years.
"This is a historic game changer for India in terms of the immense technology capability that India acquires with this move. It will also significantly boost the ESDM sector as we are now on the road to taking full control over our electronics destiny as a nation," Indian Electronics and Semiconductor Association PVG Menon said.
The semiconductor firms will be also allowed to deduct 100 per cent expenditure made on research and development for development of electronic chips or semiconductor.
India imports more than 90 per cent of consumer electronic products and if the trend continues, these imports are projected to grow to USD 300 billion by 2020, from USD 7 billion last year. In contrast, India's oil import is bill is in the region of USD 140 billion currently.
