Capex blues over fab policy

Written by Vrishti Beniwal | New Delhi, Oct 10 | Updated: Oct 11 2007, 05:36am hrs
The guidelines on semiconductor policy seem to have sparked more complexities than resolved, as the clause of showing the capital expenditure to get incentives under the policy has not gone well with some industry players.

Though the government argues that this is the standard practice globally to eliminate non-serious players, SemIndia, which will soon apply for the incentives, has its reservations on the same. SemIndia chairman and CEO Vinod Agarwal on Wednesday said it would shake the confidence of the investor, who wants to know the return on the investment.

We are in the process of applying for incentives and the company will approach the government with in a month But the guidelines anticipate a certain amount of investment first before giving incentives. This may not go down well with the investors, said Agarwal. SemIndia, in technical collaboration with chipmaker AMD, plans to invest $3 billion over the next five years in a special economic zone in Hyderabad. A third of the investment would be in the form of equity and the rest would be raised as debt.

As per the guidelines, a company applying for incentives under the semiconductor policy would be able to get the benefits only after making Rs 2,500 crore investment in case of fab units and Rs 1,000 crore in case of eco-system units. If a unit is located in a special economic zone, the incentive will be 20% of the capital expenditure during first 10 years. Units outside SEZ will get 25% capital subsidy during the first 10 years.

A department of information technology official, when contacted said, guidelines were framed after taking to the industry and that no request has been made by the industry so far on the issue. He also added that the threshold limit would be the minimum amount of the investment calculated in net present value terms for eligibility of the benefits.

As per the guidelines, an investor will have to submit a proposal to the appraisal committee along with the feasibility report and an application fee (non-refundable) of Rs 25 lakh. The committee, on the basis of the material and advice available on record, will make recommendations to the government for its approval. Investments made before the date of receipt of applications and investment in land made more than six months before the date of receipt of application will not be considered for calculation of capital expenditure.