India is looking to roll out a revamped incentive schemetotalling up to ₹10,000 crore, aimed at fostering the development of electronic and semiconductor component plants within the country according to an Economic Times report citing government officials. This initiative seeks to cultivate a supportive ecosystem for mega chip-packaging units being established by global entities such as US-based Micron, India’s Tata Group, and Kaynes Corp.
The new incentive plan, a revised iteration of the existing Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), is likely to be launched early next year, the report added.
Officials told the paper the new scheme would shift from the prevailing reimbursement approach to a ‘pari-passu’ method for fund allocation. Under the ‘parri passu’ method, the government releases funds to those firms either proportionate to their investment or on successful completion of specific milestones.
Growing Interest and Ancillary Units
After Micron, Tata Electronicsand Kaynes Corp announced their ATMP plants (assembly, testing, marking, packaging), other players like the HCL Group and Murugappa Group from Tamil Nadu are also finalising their entry into the sector, the report added. Thus, ancillary industries involved in supplying raw materials, including speciality chemicals and gases essential for the chip fabrication process, are actively seeking government support.
At present, SPECS provides reimbursement of up to 25 percent of the total capital expenditure post-project completion. Officials told the paper, there could be a possible tripling or doubling of the scheme’s current corpus (around ₹3,200-3,300 crore), to accommodate the anticipated surge in applications and investment interest.
The revised incentive plan will also introduce provisions to stimulate increased research and development (R&D) in the sector, aiming to encourage MSMEs and start-ups already engaged or interested in chemical and gas-related R&D for the semiconductor industry.
Progress and Future Endeavours
As of October 2023, the IT Ministry has greenlit 38 applications, representing a proposed investment of ₹11,485 crore, with committed incentives of ₹1,574 crore under the SPECS scheme. However, only about ₹365 crore has been disbursed to six applications until this period.
The government has advised companies to defer submission of their plans under the current scheme, awaiting the unveiling of the revised version, the report said. This strategic move aims to align with the evolving landscape of India’s burgeoning electronics and semiconductor industry.
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