Two
critical projects for setting up semiconductor wafer plants, being
pushed by the government, have run into rough weather on account of
"several deficiencies", as pointed out by a high-level official
committee. The projects — by consortiums led by Jaiprakash Associates
Ltd and HSMC Technologies India Pvt Ltd — involved an investment of over
Rs 63,000 crore.
The development may act as a roadblock in the government's plans to kick-off large-scale manufacturing of electronics in the country, including that of mobile phones. Although the two fab units, were cleared by the Congress-led UPA government in February 2014, the Narendra Modi administration too has been pushing for local manufacturing of chips and electronics, given the high level of imports. Electronics and chip making are integral part of the government's ambitious 'Make in India' project.
The official-level panel has, however, found the detailed project reports (DPRs) submitted by the two consortiums "non-satisfactory", said sources familiar with the development. "The two consortia have not been able to fulfill the conditions required to begin the projects," an official source told TOI. "They are yet to submit some 'other documents', which are considered essential to demonstrate their commitment to the projects."
Apart from the DPR, the Letter of Intent (LoI) issued to the two consortia had asked them to furnish additional documents related to incorporation of a special-purpose vehicle (SPV), injection of 25% of the equity funding by the promoters in the Phase I, providing proof of legal possession of adequate and suitable land, and furnishing performance guarantee agreements with the government. The two consortia have not complied with these additional requirements.
Jaiprakash Associates had partnered American giant IBM and Tower Semiconductor Ltd of Israel for its project which was to come up near the Yamuna Expressway in Uttar Pradesh at a cost of over Rs 34,000 crore. HSMC Technologies had partnered ST Microelectronics and Silterra Malaysia for the Rs 29,000 crore project, which was to come up in Gujarat.
The sources said the two consortia have not been able to provide a response to the queries raised by the government. The Jaiprakash Associates-led group has sought certain changes in the terms and conditions of the LoI, while the HSMC Technologies consortium has requested that they may be given time till the end of July to respond to the government's queries. The last date for submission of the documents as well as a response to the queries was till March 31, 2015.
Establishment of fab manufacturing units is seen as a pre-requisite for having a full-fledged electronics production set-up in the country. These will have a big impact on the development of electronics system design and manufacturing eco-system. Also, their local production is seen as crucial in order to stimulate the flow of capital and technology, create employment opportunities, help higher value addition in the electronic products manufacturing and reduce dependence on imports.
A delay in these two projects could be a blow to government's 'Make in India initiative that banks on promotion of local manufacturing of components.
The government had offered many incentives to encourage companies to enter fab manufacturing business. These included a 25% subsidy on capital expenditure and tax reimbursement as admissible under Modified Special Incentive Package Scheme (M-SIPS) Policy. It also allowed an exemption of basic customs duty for non-covered capital items as well as 200% deduction on expenditure on R&D. The incentives also promised an interest-free loan of approximately Rs 5,124 crore.
As per government projections, the proposed FAB units were to create direct employment of about 22,000 and indirect employment of about 1 lakh.
The development may act as a roadblock in the government's plans to kick-off large-scale manufacturing of electronics in the country, including that of mobile phones. Although the two fab units, were cleared by the Congress-led UPA government in February 2014, the Narendra Modi administration too has been pushing for local manufacturing of chips and electronics, given the high level of imports. Electronics and chip making are integral part of the government's ambitious 'Make in India' project.
The official-level panel has, however, found the detailed project reports (DPRs) submitted by the two consortiums "non-satisfactory", said sources familiar with the development. "The two consortia have not been able to fulfill the conditions required to begin the projects," an official source told TOI. "They are yet to submit some 'other documents', which are considered essential to demonstrate their commitment to the projects."
Apart from the DPR, the Letter of Intent (LoI) issued to the two consortia had asked them to furnish additional documents related to incorporation of a special-purpose vehicle (SPV), injection of 25% of the equity funding by the promoters in the Phase I, providing proof of legal possession of adequate and suitable land, and furnishing performance guarantee agreements with the government. The two consortia have not complied with these additional requirements.
Jaiprakash Associates had partnered American giant IBM and Tower Semiconductor Ltd of Israel for its project which was to come up near the Yamuna Expressway in Uttar Pradesh at a cost of over Rs 34,000 crore. HSMC Technologies had partnered ST Microelectronics and Silterra Malaysia for the Rs 29,000 crore project, which was to come up in Gujarat.
The sources said the two consortia have not been able to provide a response to the queries raised by the government. The Jaiprakash Associates-led group has sought certain changes in the terms and conditions of the LoI, while the HSMC Technologies consortium has requested that they may be given time till the end of July to respond to the government's queries. The last date for submission of the documents as well as a response to the queries was till March 31, 2015.
Establishment of fab manufacturing units is seen as a pre-requisite for having a full-fledged electronics production set-up in the country. These will have a big impact on the development of electronics system design and manufacturing eco-system. Also, their local production is seen as crucial in order to stimulate the flow of capital and technology, create employment opportunities, help higher value addition in the electronic products manufacturing and reduce dependence on imports.
A delay in these two projects could be a blow to government's 'Make in India initiative that banks on promotion of local manufacturing of components.
The government had offered many incentives to encourage companies to enter fab manufacturing business. These included a 25% subsidy on capital expenditure and tax reimbursement as admissible under Modified Special Incentive Package Scheme (M-SIPS) Policy. It also allowed an exemption of basic customs duty for non-covered capital items as well as 200% deduction on expenditure on R&D. The incentives also promised an interest-free loan of approximately Rs 5,124 crore.
As per government projections, the proposed FAB units were to create direct employment of about 22,000 and indirect employment of about 1 lakh.
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