Guidelines for the Rs 1.27 lakh crore scheme bar approved beneficiaries from selling or encumbering project assets until the entire facility begins commercial production, and set minimum operating periods, ownership requirements and capital expenditure rules.
Semiconductor manufacturers approved under the government's Semicon 2.0 programme will be barred from selling or mortgaging any portion of their projects until the entire undertaking has been declared commercially operational, according to guidelines released on Thursday (September 17).
The government had earlier notified the scheme with an incentive outlay of Rs 1.27 lakh crore. Under the rules, a beneficiary company cannot sell, transfer or otherwise part with project assets, nor create any mortgage, lien or hypothecation charge over them, unless the transaction falls within the ordinary course of business or has received prior approval from the Nodal Agency.
Six pillars, three sets of guidelines
Semicon 2.0 is built on six pillars intended to strengthen the country's chip ecosystem: design, machines and materials, setting up additional fabrication plants, expanding the ATMP and OSAT industry, research and development, and talent development. So far, guidelines have been issued for only three of them: machines and materials, new fabs, and the ATMP and OSAT segment.
Applicants under the machines and materials pillar may also claim production-linked incentives (PLI) for sourcing components and sub-assemblies made in India.
Units receiving fiscal support must remain in commercial production for at least three years from the date the entire project begins commercial operations, and must submit an undertaking to this effect.
Expenditure exclusions and ownership conditions
The guidelines also specify what will not be counted as eligible capital expenditure or investment. Money spent on land and its development, temporary structures, site offices, temporary office space and other short-term facilities at the project site is excluded. Costs of technology transfer, interest during construction (IDC) and research and development are likewise left out of the calculation.
On ownership, the applicant, promoter or group seeking incentives must hold at least 51 per cent of the project company's total equity share capital, along with equivalent voting rights, at all times while the fiscal support agreement (FSA) is in force. This requirement continues through the three-year operating period that follows the commercial operation date.
The controlling entity must be identified at the application stage itself. Its continuity is a condition for continued fiscal support and for meeting the FSA's other terms. Any change in shareholding during this period has to be reported to the Nodal Agency, the guidelines said.
Rules for the remaining three pillars, covering design, research and development, and talent development, have not yet been published.
