Semiconductor policy announced

NEW DELHI: The government has announced a capital subsidy of up to 25 percent to attract investments from global majors such as Intel for setting up semiconductor fabrication and other high-end items manufacturing units.

The Union Cabinet had earlier approved the policy, which will be operational till 2010. The subsidy will be in the form of tax breaks and interest-free loans.

Announcing the policy, IT Minister Dayanidhi Maran said the country can safely expect over 10 billion dollars of FDI. "A typical fab requires a minimum three billion dollars investment. Our country has the eco system to take 2-3 such fab," he said.

For semiconductor companies willing to avail the incentives, which will be 20 percent of the capital expenditure during the first 10 years, they have to invest a minimum Rs 2,500 crore. Such companies will have to be set up in Special Economic Zones to avail this benefit.

The threshold investment limit for manufacturing other products like storage devices, micro and nano technology products, assembly and testing of all these products and Organic Light Emitting Diodes is Rs 1,000 crore.

If the unit is located outside SEZ, the incentive would be 25 per cent of the capital subsidy in the first 10 years and countervailing duty on capital goods would be exempted.

Lack of a policy led the world's largest chip maker Intel to turn its back on India and go to Israel for setting up a fab.

India got its first proposal to start such a fab from a group, including Advanced Micro Devices and SemiIndia, for an investment consideration of three billion dollars in 2005.