X.
HIGH-TECH HABITATS
International experience has shown
that hi-tech industries flourish essentially in the rural
hinterland adjacent to cities with modern telecom and
communication infrastructure and top class hi-tech
educational/research institutions. India will promote
such 'Hi-tech Habitats' in the rural hinterland adjacent
to suitable cities. For this purpose suitable autonomous
structures will be designed and progressive regulations
will be framed to facilitate infrastructurally
self-contained Hi-Tech Habitats of high quality.
Initially, four such Hi-Tech Habitats shall be planned
and implemented in the rural hinterland of the cities:
Calcutta, Chennai,Trivandrum and Allahabad. Several such
Hi-Tech Habitats can be viably set up by empowering the
State Governments to autonomously nucleate them within a
technologically progressive and administratively liberal
use of guidelines to be prepared by a special Working
Group on Hi-Tech IT Habitats to be set up by the Task
Force.
For the above some of the States
may emulate Subic Bay of Philippines or Shenzen as
follows:
• Equip to
face competition- not fight for survival
•
Incentives to encourage investment
• Merge
manufacturing facilities for domestic and exports
production
• Harness
economies of scales.
For enabling this State Governments
may consider:
•
Identifying Areas- minimum 40 sq.Kms in the proximity
of Seaport/Airport
• Focusing
on speed-self assessment customs clearance-completely
duty free transfers within areas-no paper work-no
permission
• Giving
incentives over and above Central Government
On the basis of the reports
prepared by the Department of Electronics, Government of
India, the following recommendations are suggested:
1. Summary of
the Concessions/Incentives sought for Hi-Tech
Habitats:
i) Exemption of Interest
Tax under Section 10(15)(iv) to be amended to
include high tech park/megafabs.
ii) Income Tax
a) for
assessment purpose consider unsold unitized
goods as business assets
b)
Income on such assets be assessed on actual
accruals and not on notional basis.
c)
Depreciation, repairs be taken on actual
basis and not on notional basis
iii) Tax holiday under
Section 80IA be extended to cover high-tech
parks.
iv) Business assets of
high-tech parks including residential units be
exempted for wealth tax.
v) ECB guidelines should be
relaxed further. The average tenor of the loan is
stipulated as 7 years without any option for
prepayment. This needs to be reduced to be an
average tenor of 3 years with a provision for
prepayment.
vi) Domestic banking system
should be encouraged to finance approved
high-tech parks and not consider them as a real
estate activity. It may consider loan at soft
terms for this activity.
vii) Import concessions:
a)
Import of captive power plants by high-tech
parks be allowed at the same rate as
applicable to the power generation project
(resulting in duty reduction form present
39.7% to 22%).(It is preferable to completely
waive the duty)
b)
Import of infrastructural facility like
data/communication networks being provided in
the high tech park be allowed confessional
rate of import duty for infrastructure.(It is
preferable to completely waive the duty)
2. Chip
Manufacture and Mega FAB
Efforts should be made to locate
chip manufacturing facilities in India in collaboration
with leading international partners. The following
proposal is from the Department of Electronics,
Government of India:
The background:
1. The World IC
industry is presently US $140 billion which is
expected to grow to about Us $270 billion by the turn
of the century.
2. The Indian
semiconductor production at present is about Rs.230
crores out of which IC production is about Rs.60
crores.
3. Given the
electronic equipment target production of Rs,55,000
crores by the terminal year of the ninth plan, the
optimistic market for ICs in India would work out to
be Rs.8,000 crores. Keeping in mind the shortfall in
equipment production, the lag of equipment designs,
the tied 'SKD' assembly etc. the pessimistic
accessible IC market in India is expected to be
around Rs.3,500 crores.
4. India
presently bas some strategic capability but very
little commercial capability in ICs.
5. There are
chances for India to progress in IC area in Bipolar
Analog ICs, Standard Logic ASICs, ASSPs etc. only if
the present constraints of policy, tax regime,
industry structure, finance costs, etc. are removed
as recommended in the Report.
6. Global scale
operations including exports are possible in India in
back-end operations like assembly and test, and
design if the constraints are removed.
7. Fabs for
basic products are possible only if Government
removes constraints on inputs, create infrastructure
specially for this area takes special initiative for
attracting the multinational Joint-ventures. Modern
fabs for advanced VLSI including exports would only
be possible if multinationals are attracted to place
majority investments. This will require a special
package of incentives and financial support in
various forms.
8. If the
constraints are removed and Government takes
initiatives for encouraging joint-ventures for fabs,
a target production of about Rs,.3000 crores aimed by
the terminal year of the IX Plan can be aimed.
9. Government
should plan for establishing atleast two modern fabs
as joint ventures during the ninth plan period. In
addition to increasing the production by an order of
magnitude, this will promote the growth of chip
applications and emergence of new products and
advanced technologies in the country, encourage local
production of input materials, act as driving force
for improving infrastructure for high tech.
Industries and generate sizable export revenues in
the long run.
10. As the
above plans are executed and local activity in
fabrication increases, there will be a scope for an
independent mask-making facility. This can be
accomplished viably by spinning off into a separate
facility the existing mask units and upgrading the
same.
11. Government
should create a resource facility for IC's for
providing processes improved at R&D institutions,
trying out new ideas, prototyping of new products
before transferring to industry and human resource
development.
12. Manpower
development for microelectronics needs to be
undertaken through introducing proper courses at
graduate and post graduate levels, special courses,
training at the resource facility, training abroad,
industry consulting etc.
13. Technology
development activity in various, institutions needs
to be strengthened for building up capabilities.
14. Funds to
the tune of 5,000 crores need to be invested in the
country for up gradation of existing facilities ,
establishing new modern production, establishment of
a resource facility, manpower training and technology
development. Government contribution can be of the
order of Rs.2,500 crores.
Government
Actions Required
• Indirect
taxes on all electronic products to be reduced to
accelerate the market-Recognise microelectronics as a
vital core industry
• Import
duties to inputs on microelectronics to be zero or
near zero.
• Hi-tech
infrastructure to be established as Technology Parks
-Subsidised interest rates for microelectronics
financing.
• Attract
global investments through incentives as in
Malaysia/Thailand.
•
Restructure semiconductor sector by consolidation in
a few units.
• Fair and
fast customs procedures and approvals
•
Strengthen technology development in R&D
institutions.
• Create a
resource facility for IC prototyping and training.
• Allocate
Rs.2,500 crores in the Ninth Plan period to this
area.
Summary of the
concessions/incentives sought for
Megafabs/microelectronics units:
Tax Benefits
i) Exemption of
corporate income tax for certain years ten(10) years
with permission to carry forward losses and deduct
them as expenses for upto 5 years.
ii) In case
units are located in specified zones 50% reduction of
income tax for five years after the termination of
normal income tax holiday.
iii) Exclusion
of dividend derived from promoted enterprises from
taxable income during the corporate income tax
exemption period.
iv) Allowance
to deduct upto to 25% of the investment cost on
installing infrastructural facilities from taxable
corporate income.
v) Exemption or
reduction of major taxes including property tax,
sales tax, import duty etc.
vi) Accelerated
depreciation (the present rate is 25% which could be
enhanced to 60%).
vii) an
allowance to deduct from taxable corporate income an
amount equivalent to 5% of an increase in income
derived from exports over the previous years,
excluding the cost of insurance and transportation
for 10 years from the first date on which income is
earned.
viii) An
allowance equal to double the cost of transportation,
electricity, water supply for deduction from taxable
corporate income for 10 years from the first day on
which income is earned.
Guarantees
i) Against
nationalization
ii) Against
state monopolization of the sale of product similar
to those produced by the promoted projects.
iii) Against
price controls
iv) Against
Customs controls.
Others
i) Procurement
of indigenous raw materials, components or any other
goods by the manufacturer be exempted for sales tax,
octroi etc.
ii) Permission
to bring in foreign nationals to undertake investment
feasibility studies as also foreign technical experts
to work on promoted projects.
iii)
Import/export duties and policy to be at par with EPZ
units.
iv) All
import/export consignments to be given green channel.
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