The recommendations of the
Panel on Development, Manufacture and Export of IT
Hardware - Microelectronic, are given below :
1. For purposes of this
policy the following definitions shall apply:
covers discrete semiconductor devices such as
diodes, transistors, thyristors, as well as
Integrated Circuits (ICs) ranging from Small
Scale/Medium Scale ICs (SSI/MSI) to Large
Scale/Very Large Scale ICs(LSI/VLSI) and, more
recently System Level Integration/System-on-chip
- The Microelectronics
Manufacturing Unit (MMU) is a unit engaged in one
or more of the following activities relating to
the manufacture of discrete semiconductor devices
as well as ICs:
Design (CAD) of discrete semiconductor devices as
well as ICs.
device manufacturing as well as foundry activity
involving the complete range of unit processes,
starting from a base wafer to packaged and tested
devices & ICs.
packaging operation based on diffused wafers.
development and manufacture of capital equipment for
the manufacture of discrete semiconductor devices as
well as ICs.
- Megafab is an MMU
engaged in integrated device manufacturing
foundry operations with a total unit plant
investment level of Rs.2000 crore and above.
Policy Package for
will pro-actively invite major international
companies to set up megafabs in the country by
giving them appropriate incentives, and
infrastructural facilities as well as removing
all bottlenecks and simplifying procedures for
maximising their velocity of business which will
be comparable to international levels. Towards
this end the following policy measures will be
i. All the policy
instruments available to the S-BIT units will apply
mutatis mutandis to the investments in the setting up
and running of megafabs.
ii. Corporate Income
Tax will be exempted for 10 years from the first day
on which income is earned with permission to carry
forward losses and deduct them as expenses up to 5
years. Where units are set up as S-BIT
zones/habitats, 50% reduction of Income Tax for a
further period of five years will be applicable.
iii. Dividends, if
paid out, will be free from all taxes during the
Corporate Income Tax exemption period in the hands of
the investors or shareholders. Further, an investment
allowance of 25% will be available for deduction from
the taxable corporate Income.
iv. Compensation of
training expenses including actual expenses,
accommodation and transportation will be available
through a cash grant.
v. Legally valid
guarantees will be given against nationalisation,
canalisation and State monopolisation.
vi. The movement of
foreign specialists involved in making feasibility
studies, setting up of facilities and assisting in
the running of facilities shall be facilitated by
simplified procedures administered by a single window
which will give all clearances within 48 hours.
High Tech Parks
3. Government would
encourage, build, subsidise high tech parks, separately
or as a part of S-BIT zones/habitats, especially suited
to microelectronics as defined earlier. Such parks would
require inputs like high purity gases, abundant supply of
good quality water, stable and quality power, high speed
connectivity, cluster of support services for supporting
megafabs etc. Fiscal measures for setting up of such
parks are given below:
of Interest Tax under Sec 10(15)(iv) to be
amended to include high tech park.
assessment purpose consider unsold units as business
on such assets be assessed on actual accruals and not
on notional basis.
Depreciation, repairs be taken on actuals basis and
not on notional basis.
assets of high tech parks including residential
units be exempted from wealth tax.
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 an average tenor of 3 years with a
provision for prepayment.
banking system should be encouraged to finance
approved high tech parks and not consider them as
a real estate activity. It may consider soft
loans for these activities(interest burden could
be offset by the Central and State Governments on
a matching basis.)
imports such as captive power plant,
data/communication infrastructure, testing
laboratory equipment, effluent treatment plant,
air-conditioning plant etc. required for setting
up and running a high tech park typically
consisting of industrial zone, R&D zone,
housing zone, urban zone, amenity zone etc. shall
be allowed at zero import duty.
purchase transactions will be free of Sales Tax,
Entry Tax, Excise Duty, Purchase Tax/Trade
Tax/Turnover Tax and Octroi.
tech parks should be recognised as eligible
investments in infrastructure and therefore
receive the benefit of nil tax under Section
80(I)(A) of the Income Tax Act.
addition, High tech parks would also be eligible
for all the concessions/benefits/incentives for
industrial parks as decided by the Government
based on the "India Infrastructure Report -
Policy Imperatives for Growth and Welfare"
prepared by the Expert Group on the
Commercialisation of Infrastructure Projects.
R&D and Manpower
supporting basic and applied research, technology
development, manpower development at academic
institutions, R&D laboratories and industry
covering various facets of semiconductor
technology including discrete devices, integrated
circuits, CAD, software tools, capital equipment
Centres of Excellence on various facets of
semiconductor technology e.g. system level
integration/system on chip, application specific
processor design, low power IC design,
microelectromechanical systems applications
development with a view to enhance
microelectronics usage, power devices, III-V
compounds, high speed testing etc.
up a National level institute/facility for taking
process development at academic institutions and
R&D laboratories closer to industrial
acceptance by undertaking additional process
& device structure research, trying out new
process and device structure concepts,
prototyping of new products, testing of discrete
devices as well as ICs etc.
and enhance the scope and contents of the
manpower development programme in VLSI design
& related software initiated by DOE to
include, inter-alia, more institutions, upgrading
and augmenting the CAD environment, short-term
courses, workshops, seminars, conferences; CAD
tools and related software development, marketing
Indian competence abroad etc.
'India Chip" programme along the lines
similar to MOSIS in USA and CMP in France to
nurture microelectronic design ideas of students
and researchers at academic institutions and
R&D laboratories as well as in small and
medium scale industries.
IIIT should be set up a specialization in
should set up an advisory core group representing
academic institutions, R&D laboratories and
industry which would prepare model syllabi and
also address teacher training needs.
11. To implement the
measures and programmes outlined above covering a
proactive approach for attracting investments in
Megafabs, catalysing setting up of High Tech Parks,
R&D and manpower development, as well as encouraging
and supporting the domestic microelectronics industry to
improve economy of scale, upgradation of technology;
catalysing the setting up of world-class assembly,
packaging, testing units as well as any other measures
and programmes that are felt desirable to promote the
microelectronics industry and attract investments in this
sector, an appropriate institutional mechanism along the
lines similar to EDB, Singapore with a national corpus
fund would be set up. The disbursement of this corpus
fund would be, among other modalities, in the form of one
third matching investment as soft loans/equity/venture
capital/cash grants to a similar one third matching
investment by the State Government and one third
investment by the MMU/Company.
Mini Fabs :
12. A new trend is growing
worldwide in setting up of Minifabs for ASIC Chip, FPGA
Chip, etc. which cost in the range between Rs. 60 crores
and Rs. 150 crores. There is considerable scope for
setting up of a number of such Minifabs both in the
public domain and in the private sector. India has a
large stake in the design and manufacture of ASIC and
FPGA, because, the economy of scale of production of
these very well matches the demands that are coming up
from within the Indian market.