India is set to launch a revamped incentive program worth Rs.10,000 crore to encourage the establishment of electronic and semiconductor component plants within the country. According to government sources, this initiative aims to support the development of large chip-packaging units by global companies like Micron from the US, India's Tata Group, and Kaynes Corp.

The proposed scheme, an updated version of the current Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), is expected to kick off early next year. Government officials revealed that the new plan will shift from the current reimbursement method to a 'pari-passu' approach for fund allocation. This means that funds will be allocated to companies in proportion to their investments or upon achieving specific milestones.

Following the announcements by Micron, Tata Electronics, and Kaynes Corp about their assembly, testing, marking, and packaging (ATMP) plants, other players like the HCL Group and Murugappa Group are also preparing to enter the sector, particularly in Tamil Nadu. As a result, industries providing raw materials crucial for chip fabrication, such as specialty chemicals and gases, are actively seeking government backing.

Presently, SPECS offers reimbursement of up to 25 percent of the total capital expenditure post-project completion. Officials hinted at a potential increase in the scheme's current funds (around Rs.3,200-3,300 crore) to accommodate the expected rise in applications and investment interest.

The revised plan will also include measures to promote more research and development (R&D) activities in the sector, targeting MSMEs and startups involved 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 Rs.11,485 crore, with committed incentives of Rs.1,574 crore under the SPECS scheme. However, only about Rs.365 crore has been disbursed to six applications by this time.

The government has recommended companies hold off on submitting their proposals under the current scheme, anticipating the launch of the updated version. This strategic move aims to synchronize with the evolving landscape of India's thriving electronics and semiconductor industry.

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