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India's Special Incentive Package Scheme (SIPS), aimed at galvanising investments in semiconductor fabs, ecosystem units and solar PV projects, has attracted 26 proposals, together worth more than Rs 2,29,000 crore. The ambitious scheme — the Government's endeavour to position India in the league of global hi-tech manufacturing destinations — closed on March 31, 2010, three years after it was flagged off by the Centre. With the SIPS counter now closed, no new applications will be accepted by the Department of IT (DIT) under the scheme, although the processing of existing applications will continue. Big names A source said that the last few months preceding the deadline saw a spurt of applications, including big names such as BHEL, Birla Surya, and Sterlite Technologies.
The DIT had also received an investment proposal from Moser Baer for semiconductor packaging (ATMP), the source added. While BHEL's Rs 1,566-crore investment proposal pertains to solar cells and modules, Sterlite's application covers LCD panels and glass substrate (Rs 9,600 crore). Other companies that submitted applications recently include Jain Solar Energy Pvt Ltd, Enfield Solar Energy Ltd and Cosmic Photovoltaic Pvt Ltd. The rush to apply for incentives under SIPS ahead of the deadline is evident from the fact that as many as seven formal proposals were received by the DIT last month alone. While only a few applications are in the areas of wafer-fab or other eco-system units, a majority of the overall proposals received till date are to do with production of solar PV cells and modules. This assumes significance considering that India expects to rely on renewable energy to reduce its emission intensity by 2020.
The Government recently launched a National Solar Mission that aims to feed 20,000 MW to the national grid by 2022. Green signal The sources further said that till early December 2009, the DIT had received 18 applications under SIPS. Of these, 13 were granted in-principle clearance by the Government, implying prima facie that the proposals met the basic technical criteria. Those given the green signal were Titan Energy Systems, Reliance Industries, Tata BP Solar Power, PV Technologies India (a subsidiary of Moser Baer), KSK Surya PV Ventures, Signet Solar, Indo-Solar Ltd, Solar Semiconductors, TF SolarPower, Lanco Solar Pvt Ltd, EPV Solar and Bhaskar Silicon. Subsequently, these applicants were asked to complete the financial closure. Although the response to the scheme has been overwhelming, going by the sheer number of applications filed, the global downturn may have played a bit of a spoiler prolonging the process of financial closure.
At last count, only six applicants were either close to achieving financial closure or had tied-up commitments higher than the threshold value stipulated in the scheme (Rs 2,500 crore for fab units and Rs 1,000 crore for eco-system units, including PV). Financial support In the next stage, the appraisal committee will recommend whether or not the Government can approve financial support to a particular project. The semiconductor scheme stipulates that the Central Government will provide incentives of 20 per cent of capital expenditure — land, building, plant, machinery and technology — during the first 10 years, for units in Special Economic Zones. For non-SEZ units, incentives are capped at 25 per cent of capital expenditure. Any unit, approved under the scheme, can claim incentives in the form of capital subsidy or equity participation.
This can be a mix of equity in the project (up to 26 per cent) and capital subsidy in the form of investment grant and interest subsidy. On the face of it, while capital subsidy may appear to be the logical choice for any investor, there is a small catch. Incentive, in the form of capital subsidy, can be availed only after an applicant pumps in investments matching the threshold value (for the project), whereas investors who opt for equity as part of the incentive package can be given such equity after financial closure for the project. This will be released on proportionate basis as promoters bring in their own equity into the SIPS project.
