The semiconductor industry and
other high tech industries are characterized by specific
constraints that challenge their viability. These are highly
capital intensive and have to deal with constantly changing
technology. It, therefore, becomes imperative on the part of
the Government to create a conducive environment for
manufacturing and offer a package of incentives comparable
with other countries to attract global investments into the
manufacturing sector as well as help bridge the viability gap
due to lack of adequate infrastructure and eco-system. While
this will involve an initial cost incurred by the Government
to seed the manufacturing industry in the country, the return
on investments by way of contribution to GDP will succinctly
justify the incentives planned as a part of the Special
Incentive Package for semiconductor manufacturing and other
high tech industries in the country.
||Special Incentive Package as
indicated. The Special Incentive Package is as under
||The investment will be for the
manufacture of all semiconductors and eco-system units, namely
displays, including Liquid Crystal Displays (LCD), Organic
Light Emitting Diodes (OLED), Plasma Display Panels (PDP), any
other emerging displays; storage devices; solar cells;
Photovoltaic; other advanced micro and nano technology
products; assembly and test of all the above products.
||The Special Incentive Package
shall be for state-of-the art technology.
||In the case of semiconductor
manufacturing (Fab units) products, the threshold Net Present
Value (NPV) of investment will be Rs. 2,500 crore or US$ 566
million and above. The threshold NPV of investment in
manufacture of other eco-system products will be Rs.1,000
crore and above. This threshold value shall be taken as the
Net Present Value (NPV) of investments made during the first
10 years of the project life and the discount rate will be at
the rate of 9%.
||The Central Government or any of
its agencies shall provide incentive of 20% of the capital
expenditure (as defined in sub-paragraph 3.3) during the first
10 years for the units in SEZ and 25% of the capital
expenditure for non-SEZ units. Non-SEZ units shall be exempt
from CVD. The incentives, if any, offered by the State
Government or any of its agencies or local bodies shall be
over and above this amount.
Note: The customs notification exempting CVD for non-SEZ
units will be issued separately by the
Ministry of Finance.
||The period of 10 years shall be
the first 10 years of the project life from the start of the
project and not with regard to the start of any subsequent
phase of the project.
||The capital expenditure will be
the total of capital expenditure in land, building, plant and
machinery and technology including R&D. The cost of land
exceeding 2% of the capital expenditure shall not be
considered for calculation in this regard.
||Any unit may claim incentives in
the form of capital subsidy or equity participation in any
combination of the following:
1. Equity in the project, not
2. Capital subsidy in the form of
investment grant and interest subsidy
The entire equity contribution will be taken towards the value
of incentive package. There shall be an exit option, to be
exercised by the Government, at a suitable point of time in
the future, after the project goes on stream.
||Those investors who choose equity
as part of their incentive package shall be given such equity
after the financial closure for the project and equity shall
be released on a proportionate basis as equity is brought in
by the promoters.
||All other incentives shall be
released after the end of the financial year in which the NPV
of the total investment exceeds the threshold value.
||Thereafter, the incentives shall
be provided on an annual basis on the value of investments
made during the year and be restricted to the first 10 years
of the project life.
||There shall be a ceiling on
number of units - 2 to 3 'fab' units and 10 eco-system units.
Incentive Package shall be available only up to 31.3.2010