Indian government to offer $1 billion incentive to chip manufacturing companies, who are willing to set up production units in India, as a part of the “Make in India” initiative. The intention behind this step is to reduce the dependency on China amidst the border tensions between the two countries.
According to a report published by Reuters, a government official has spoken to the team of Reuters and revealed that the government will provide $1 billion(Rs. 7,340 crores) as an incentive to each chip manufacturer to a setup production plant in India. He also mentioned that the government will buy the chips and mandate the private sector to buy chips from the India-based production units. The government official denied disclosing his identity.
The Indian government has also asked the semiconductor players to provide feedback regarding the process to disburse the incentive. Governments, across the globe, are inviting chip-makers to set up manufacturing units in their countries in order to reduce the dependency on Taiwan.
India also wants to cut the electronics and telecom imports from China. The chips manufactured in India will be regarded as “trusted sources” and can be used in equipment starting from CCTV cameras to automobiles.
The Indian government estimates that it would cost $5-$7 billion and 2-3 years to set up of semi-conductor manufacturing plant in India, however, the government is willing to provide interest-free loans, waivers on custom duty, $1 billion cash to interested firms. The government hasn’t disclosed whether any chip manufacturers have shown interest in setting up plants in India.
India organized an “Expression of Interest” for the foreign chip-makers in December to lure the firms into setting up plants in India. The last date for submission for that expression of interest was extended to the end of March considering the industry demand.
Society of Indian Automobile Manufacturers(SIAM) held a meeting with the official executives of the Ministry of Electronics and Information Technology to discuss the shortage and demand of chips in the automobile sector. The shortage of chips is holding back the growth in the Indian market seen after the devastating year of 2020 due to the pandemic.
The renewed push from the Indian government has attracted several MNCs to set up production units in India starting from Amazon and Xiaomi. Companies are aiming to claim the “Production-linked Incentive” offered by the Indian government as a strategy to promote the “Make in India” initiative. This effort will ultimately help the pandemic hit-economy of India to revive.