Explained: What’s on offer in Gujarat’s semiconductor policy

The five-year policy aims to speed up project execution besides establishing a semiconductor and display fabrication manufacturing base in the state; a Semicon City is also in the works

Gujarat semiconductor
India is aiming to become a key player in the global supply chain for chips | Representational image

The Gujarat government has announced a dedicated ‘Gujarat Semiconductor Policy 2022-27’ with an aim to generate at least 200,000 employment opportunities over  five years. The state also proposes to develop a special ‘Semicon City’.

In the new policy, the Bhupendra Patel-led state government has decided to give large subsidies on power, land and water tariffs for entrepreneurs interested in investing in semiconductors or display fabrication manufacturing in the state.

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With this, Gujarat has become the first state in the country to have a dedicated semiconductor policy. According to the state government, the main objective of the policy is to make Gujarat a pioneer in developing the Electronics System Design & Manufacturing (ESDM) ecosystem.

A fillip to India Semiconductor Mission

The Union government recently announced the India Semiconductor Mission (ISM) and it has already come out with four policies providing support to semiconductor and display fab projects. The Gujarat policy would focus on guiding a significant portion of investments made under these ISM policies towards the state.

To support this goal, the Gujarat government will be setting up a ‘Semicon city’ over 5000-10,000 acres at the Dholera Special Investment Region (SIR), which will serve as a dedicated manufacturing base for the semiconductor and display fab sector.

Under the policy, Gujarat will provide additional capital assistance at 40 per cent of the capex assistance extended by the Centre for the projects approved under ISM. One project each of semiconductor and display fabrication will get support. In case of multiple applications, the state-appointed high-powered committee will make recommendations on the basis of credentials of projects. The capital assistance shall be disbursed over five years from the year after the investment is made.

Incentives promised

Eligible projects will get 75 per cent subsidy on the procurement of the first 200 acres of land in the SIR, while additional land for upstream or downstream projects will get 50 per cent subsidy on land cost. Moreover, one-time reimbursement of 100 per cent stamp-duty and registration fees paid to the government, fixed water tariff at Rs 12 per cubic metre for five years and a capital subsidy of 50 per cent for desalination plants are the fiscal benefits under the new policy. Further, the approved project will get a power subsidy of Rs 2 per unit.

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The Gujarat government shall constitute a high-powered committee for approving assistance to display FAB projects, semiconductor FAB projects, and projects with a proposed investment of Rs 10 billion or more. A state-level empowered committee shall be constituted for approving assistance for projects with a proposed investment of less than Rs 10 billion.

The Indian semiconductor market was valued at $15 billion in 2020 and is projected to reach $63 billion by 2026.

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