Centre lays down norms for chip policy

In a bid to attract investments worth billions of dollars and put India on the global semiconductor map, the government today issued guidelines for firms in the segment.

The Centre had on February 22 announced incentives in its semiconductor policy to buoy the semiconductor ecosystem. But the guidelines were awaited.

While it has yet to issue the full details, the Appraisal Committee has said that the interested investors will have to submit a proposal before it along with the feasibility report.

To ensure that only serious players apply, an application with a non-refundable application fee of Rs 25 lakh has been prescribed. The committee, in a brief statement, said any investment before the date of the receipt of the application and the investment made more than six months before the date of the receipt of the application would not be considered for the calculation of capital expenditure.

Further, the application has to be submitted with a report of the annual audited accountants as adopted by the board of directors and a certificate from the auditors of the company with regard to the datewise expenditure on items applicable under the scheme.

The government has categorically stated that only technologically sound projects will be eligible under the special incentive package scheme. However, investors who can attract more investments will be encouraged. The guidelines also define terms like fab unit, ecosystem unit, state-of-the-art technology and capital expenditure, among others.

Under the policy, the Centre will bear 20 per cent capital expenditure in the first 10 years if a unit is located in a special economic zone (SEZ). This will be 25 per cent in other cases. The countervailing duty (CVD) on capital goods will be exempted in case of units outside the SEZs. The policy entails that for semiconductor manufacturing (wafer-fab) plants, the threshold net present value (NPV) of investments will be Rs 2,500 crore. This will be Rs 1,000 crore for other products.

The policy covers LCDs, plasmas, storage devices, solar cells, photo-voltaics and nanotechnology products and includes assembly and testing of these products. The domestic market for electronics goods is expected to touch $363 billion by 2015 while the domestic demand for semiconductors is projected at $43 billion. Hyderabad-based SemIndia and HSMC have already announced plans to set up fab units at an investment of $3 billion and $4 billion, respectively.

Moser Baer has also announced a plan to establish a thin solar fab with an investment of $250 million while California's Signet Solar has announced an investment of $2 billion for making photovoltaic modules in India.