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PM's words breathe life for semiconductor policy

India may finally have a semiconductor policy as well as a separate hardware, reports Prerna K Mishra.

india Updated: Nov 07, 2006 19:36 IST

Thanks to the interest shown by Prime Minister Manmohan Singh last week, India may finally have a semiconductor policy as well as a separate hardware and electronics manufacturing policy in place by the year-end, government and industry sources told Hindustan Times.

The Prime Minister's commitment made in Chennai on having a forward-looking policy regime for the hardware sector has sent both the Department of Information Technology (DIT) and the Finance Ministry into a bout of activity. Thus far, both ministries were dragging their feet, with policies going back and forth between the two.

The two ministries sprung into action after Dr Singh said it was essential to develop semiconductor fabrication capabilities to support the information and communication technology sector, when he was inaugurating an industrial park for global electronic contract manufacturer Flextronics last on Saturday.

An industry official close to the development said Communications and IT Minister Dayanidhi Maran has put his foot on the accelerator to get both the policies in shape by December this year.

Officials offered no comment, but a government source said the minister had retained RC Sachdeva, a senior director in the DIT who was anchoring both the policies for six months more after his retirement that was due on October 31, for six more months.

The two policies address two distinct industry segments. The more capital-incentive semiconductor policy will go a step beyond the incentive package given to the Special Economic Zones to attract serious manufacturers.

“It cannot be a mirror image of the SEZ policy as the demands of the sector are different. The semiconductor sector is highly capital-intensive and needs some kind of risk mitigation or government guarantee or equity participation to have the confidence to set up manufacturing in India,” says an industry source close to drafting of the policy.

To deal with this, this Finance Ministry has proposed the setting up of a combined fund, leaving its deployment part to the DIT.

“Under this model, DIT would be free to take a call on whether to take equity participation, or offer capital on a case to case basis or even offer grants to potential manufacturers,” the source added. The proposal is currently being examined by the DIT.

The government has already committed $250 million for equity participation in the $3 billion SemIndia consortium project set to come up in Hyderabad.

The two policies have found favour with the Prime Minister as the domestic electronics and information technology market has the potential to grow to $363 billion by 2015 from $28 billion last year, according to industry estimates. A major part of this growth will be in hardware including semiconductor chips, according to a study done by the Indian Semiconductor Association.