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News >> Technology >>
Fight over Fab City project
By ST Team
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Tuesday, 12 September 2006, 19:30 IST
NEW DELHI: The Fab city project of Hyderabad faces a hurdle as the Finance Ministry and Department of Information Technology (DIT) battle over standard operating procedures (sops) for the semiconductor industry and chip making facilities.
The semiconductor policy proposed by the DIT is to be re-worked, with the Prime Ministers Office directing that incentives be restricted to 25 per cent of the total capital expenditure, while North Block is amenable to anything between zero and 15 per cent.
The tiff arose when the DIT proposed an incentive package of around 50 per cent of the project cost. On the other hand, the North Block policy said that either no incentives are given or they are limited to 15 per cent of the project cost, at par with the sops given by Israel.
SemIndia's project facing hurdles raised by the government is upsetting calculations of the likes of Intel and AMD, which is a partnering group of NRIs promoting SemIndia. Potential NRI investors and Taiwanese companies said that they would choose to invest in India only when the policies are finalized.
The government is deciding whether the technology should be entitled for a grant of subsidies and tax incentives. The project needs high investment of nearly Rs 1,350 crore and is feasible only if it avails incentives and subsidies worth Rs 300 crore.
The North Block feels that SemIndia technology is "obsolete" and outdated which is not eligible for any subsidies, as per the current standards. A finance ministry source even reported, In a way, the foreign suppliers are dumping something they don't want themselves on us. It is not fair to promote it by way of subsidies and other tax incentives.
The DIT is not for using technology as a benchmark. They feel that it should not be an issue when the country is trying to make mark in the global semiconductor sector.
The infotech department had proposed that the government should chip in with up to 15 per cent of the project cost, in addition to allowing duty-free to inputs, components and machinery. There was also a proposal put in place that there should be a simpler dispensation for these companies to access capital.
Some of the other general incentives such as zero interest loans to Rs 400 crore up to five years upfront would cost Rs 200 crore, while an interest subsidy of 50 per cent for 10 years would cost another Rs 250 crore. Similarly, 100 per cent income tax exemption for 10 years, coupled with exemption on profits ploughed back for the next five years, would have an implication of Rs 17,500 crore. Excise duty reductions would cost Rs 9,000 crore.
The finance ministry quoted the example of Israel, saying that Intel invested in the country in spite of being offered only 15 per cent concession. The concessions offered in India accounted for nearly 50 per cent of the capital cost of the projects.
The IT minister Dayanidhi Maran approached PM Manmohan Singh saying that the concessions were not sufficient to attract investors, while the Finance ministry retorted that even companies like Intel were not setting up chip-making facility but were building only testing facilities.
The project would begin with an assembly, testing and packaging facility, to churn out about 25 million chips. The Fab facility, as and when it comes up, would produce about 2.4 lakh wafers and each wafer would be converted into hundreds of chips.
The IT department and finance ministry are now having talks to sort out the differences to find a common ground.
SemIndia will be the anchor client and developer of the Fab city that is slated to come up in 1,250 acres near Shamshabad close to Hyderabad city. The project will have multiple fabs and house all the necessary ancillaries. So far, Andhra government allotted 300 acres to the project, while the remaining land would be made available as the project progressed.