Nod for two chip-making facilities worth Rs 25k cr

New Delhi: In a major boost to cut down on import of semiconductors, the government on Thursday approved plans to set up two chip-making facilities that will entail an investment of over Rs 25,000 crore.

Two consortiums, one led by JP Associates and other by Hindustan Semiconductors, have shown interest in setting up the plants, which received in-principle approval from the cabinet. On August 8, TOI had reported that the consortium would include IBM and ST Microelectronics.

The Cabinet approved the plan despite objections by the Planning Commission, which was not in favour of giving concessions, which are estimated at over Rs 50,000 crore over the next 13 years. Officials, however, said that most of the concessions are already available under the policy.

The long-awaited decision to allow setting up of semiconductor manufacturing facilities would reduce imports, through which 80% of domestic requirements are met. The move is seen as part of a plan to reduce dollar outflow at a time when the economy is battling a record current account deficit, which has also impacted the rupee.

"Cabinet has given in-principle approval for setting up of semi-conductor wafer fabrication manufacturing facilities," I&B minister Manish Tewari told reporters.

The Cabinet has in-principle also approved that incentives that will be given to the two proposals, will also be offered to other players, who are interested in setting up semiconductor plants.

The Cabinet last year had approved the Modified Special Incentive Package Scheme for the electronics manufacturing industry. The scheme provides for subsidy in capital expenditure with a limit of 20% for investment in Special Economic Zone and 25% in non-SEZs.

The industry welcomed the move. "By 2020, when the total electronics, system, design and manufacturing market is expected to reach $400 billion. Semiconductor consumption is expected to rise to touch $55 billion. With the location of a fab in India, the country could achieve a degree of self-sufficiency in electronics," The India Electronics and Semiconductor Association (IESA) said in a statement.