By possibly reducing tech transfer funding, while offering additional incentives for domestic chip production, MeitY is reportedly considering extending ISM Phase-II fiscal support to eight years.
The central government is contemplating to prolong the fiscal assistance period for the second phase of the India Semiconductor Mission (ISM) from the existing five years to eight years, according to a report by the Economic Times.
Under ISM Phase-II, the projects approved might also qualify for extra financial support for employee skill development, a government source told ET. Additionally, the financial support for technology transfer costs might be removed, while the budget for administrative expenses could be increased.
The government could also provide additional interest-free loans and assistance from the Ministry of Electronics and Information Technology (MeitY) to preferentially obtain domestically produced and packaged chips.
According to another source, the upcoming phase of the ISM might lower the incentives for outsourced assembly, testing, and packaging units from the current 50% to below 30%, maintaining a consistent approach across these areas.
Furthermore, it was disclosed that the government has been receiving ongoing feedback from industry and global experts after the successful execution of the first phase and is making efforts to integrate as many of these insights as possible. Thus, the proposal is expected to include clearer reimbursement guidelines, noting that these ideas were discussed during the early planning stages.
Besides, successful applicants might receive an incentive ranging from 30% to 35% of their total capital expenditure for establishing units related to gases, chemicals, raw materials, metals, and other metallurgy components.
Last week, it was reported that the ISM is expected to receive a second budget allocation of up to $10 billion, soon after the Maharashtra cabinet panel approved a $10 billion investment plan from a joint venture between Tower Semiconductor and Adani Group to establish a semiconductor chip manufacturing facility in Taloja, Panvel.
Now, since the funds from the first phase, which totalled $11 billion, are nearly depleted, the government will need to secure additional funding for the ISM.
In the first phase, the government has approved five semiconductor projects, including a chip fabrication unit by Tata Group and Powerchip Semiconductor Manufacturing Corp in Dholera, Gujarat, along with four chip packaging units.
If the ISM approves, the Adani-Tower project will become India’s second chip fabrication facility and the sixth overall to receive approval from the central government.
Additionally, the Union Cabinet has given the green light to a Rs 33.07 billion proposal for an OSAT unit by Kaynes Semicon, based in Mysuru. To be established in Sanand, Gujarat, this unit is projected to produce 6.3 million chips daily.
