India is set to introduce an enhanced incentive scheme, amounting to ₹10,000 crore, to foster the growth of electronic and semiconductor component plants within the country, citing government sources. The initiative aims to create a conducive environment for mega chip-packaging units established by global entities like Micron from the US, India’s Tata Group, and Kaynes Corp.
The revamped incentive plan, a modified version of the existing Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), is expected to be launched early next year.
According to officials, the new scheme will transition from the current reimbursement approach to a ‘pari-passu’ method for fund allocation. Under this approach, the government allocates funds to companies either proportionate to their investment or upon successful completion of specific milestones.
Following announcements from Micron, Tata Electronics, and Kaynes Corp about their Assembly, Testing, Marking, and Packaging (ATMP) plants, other players such as the HCL Group and Murugappa Group from Tamil Nadu are reportedly finalizing their entry into the sector. This surge in interest has prompted ancillary industries supplying raw materials for chip fabrication, including speciality chemicals and gases, to actively seek government support.
The existing SPECS scheme currently provides reimbursement of up to 25 percent of the total capital expenditure post-project completion. Officials mentioned a potential tripling or doubling of the scheme’s current corpus (around ₹3,200-3,300 crore) to accommodate the anticipated increase in applications and investment interest.
The revised incentive plan will also include provisions to stimulate increased research and development (R&D) in the sector. This is aimed at encouraging Micro, Small, and Medium Enterprises (MSMEs) and startups engaged or interested in chemical and gas-related R&D for the semiconductor industry.
As of October 2023, the IT Ministry has approved 38 applications representing a proposed investment of ₹11,485 crore, with committed incentives of ₹1,574 crore under the SPECS scheme. However, only about ₹365 crore has been disbursed to six applications until this period.
Companies have been advised to hold off on submitting their plans under the current scheme, awaiting the unveiling of the revised version, aligning with the evolving landscape of India’s growing electronics and semiconductor industry.
