India’s first chip fab to cost 91,000 crore

A Union cabinet meeting chaired by Prime Minister Narendra Modi cleared all three projects. (Photo: Reuters)
A Union cabinet meeting chaired by Prime Minister Narendra Modi cleared all three projects. (Photo: Reuters)

Summary

  • Two Tata group projects among three to win Cabinet approval

New Delhi: India’s chip-making ambitions took a giant leap on Thursday with the Centre greenlighting three projects worth 1.26 trillion, with the Tata group leading two of them.

While Tata Electronics Pvt. Ltd (TEPL) will build India’s first semiconductor fab in Gujarat’s Dholera for 91,000 crore along with Taiwan’s Powerchip Semiconductor Manufacturing Co. (PSMC), Tata Semiconductor Assembly and Test Pvt. Ltd (TSAT) will build an assembly, testing, marking and packaging (ATMP) plant in Assam’s Morigaon for 27,000 crore. Separately, CG Power Pvt. Ltd will build an ATMP unit in Gujarat’s Sanand at an investment of 7,600 crore, along with Japan’s Renesas Electronics.

A Union cabinet meeting chaired by Prime Minister Narendra Modi cleared all three projects, bringing chip investments approved so far to around 1.5 trillion, including Micron’s ATMP plant cleared last June. Separately, the cabinet also okayed an incentive scheme for rooftop solar power with 75,000 crore outlay, set the stage for auctioning critical minerals by fixing their royalty rates, and approved subsidy rates for the next sowing season.

Ground-breaking for all three semiconductor projects is expected in the next 100 days, IT minister Ashwini Vaishnaw said, adding the Tata-PSMC fab may be ready in around two and a half years, producing around 3 billion chips a year across 28nm, 50nm, 55nm and 90nm nodes.

“The facilities combined will generate 1 lakh indirect jobs, and 26,000 direct jobs. A number of key component supply chain companies will also come to India, such as five key strategic companies that we welcomed to India after Micron’s factory construction began," Vaishnaw added.

The Cabinet did not take up Tower Semiconductor’s application for an $11 billion fab, minister of state for IT Rajeev Chandrasekhar said. “Tower’s application spans a prolonged period and is a complex fab proposal, and is likely to be taken to the Cabinet in the coming months," Chandrasekhar said. He said the goverment has so far received $26 billion worth of semiconductor applications, including the Tower proposal.

Vaishnaw added that the Centre has offered electronics design automation (EDA) tools to 104 Indian universities, licensed from Cadence Design, Synopsys and Siemens. “These very expensive tools are helping us create a talent pool of 300,000 engineers, who will then work across chip design, fabs and ATMP facilities. These will then lead to a build-up of value addition in electronics manufacturing across India," Vaishnaw said.

Chandrasekhar said India now consumes $110 billion in semiconductors, making it the third largest consumer after China and North America.

Separately, the cabinet approved 75,021 crore subsidies for rooftop solar equipment for 10 million homes under PM Surya Ghar Muft Bijli Yojana, first proposed in the interim budget on 1 February. Equipment up to 1 kilowatt (kW) will get a 30,000 subsidy, while for 2 kW and 3 kW systems, they will be 60,000 and 78,000, respectively. Households covered by the scheme will get free power up to 300 units a month, as well as access to collateral-free, low-interest loans for installing solar power equipment. The government expects the scheme to fuel substantial household savings and reduce the strain on electricity grids.

The interim budget had said the scheme’s beneficiaries would be able to save 15,000-18,000 per year on their electricity bills. The scheme will be implemented through special purpose vehicles established by central public sector enterprises designated for each state. State-run REC Ltd will be the implementing agency for the scheme.

The government will also develop a ‘model solar village’ in each district of the country to encourage adoption of rooftop solar power in rural areas, Union minister for information and broadcasting Anurag Thakur said.

In another key decision, the cabinet approved royalty rates for 12 critical and strategic minerals—beryllium, cadmium, cobalt, gallium, indium, rhenium, selenium, tantalum, tellurium, titanium, tungsten and vanadium—paving the way for auctioning blocks of these minerals. These minerals are key components for semiconductors, batteries and solar module manufacturing, playing an important role in India’s net zero target of 2070 and the ambitious plan to become a manufacturing hub.

The government also approved a subsidy of 24,420 crore for phosphatic and potassic (P&K) fertilizers, adding three new grades to aid farmers and enhance the productivity of oilseeds and pulses. It also approved the fertilizer department’s proposal to set nutrient-based subsidy (NBS) rates for the 2024-25 kharif sowing season, which runs from April to September. The subsidy on di-ammonium phosphate (DAP) will continue at 4,500 per tonne.

“Despite rising prices of fertilizers in the global market, we have decided to keep the prices the same as the last season," minister Anurag Thakur said. Per-kilogram subsidies for nitrogen (N), phosphatic (P) potassic (K) and Sulphur (S) fertilizers have been set at 47.02, 28.72, 2.38, and 1.89 respectively. The subsidy on phosphatic fertilisers has been increased to 28.72 per kg from 20.82 per kg in the 2023 rabi season; however, the subsidy on nitrogen (N), potassic (K) and Sulphur (S) remain unchanged.

DAP-based fertilizers will be available for 1,350 per bag, while muriate of phosphate (MOP) fertilizers will be available for 1,670 a bag, and NPK (nitrogen, phosphorus and potassium) for 1,470 per bag. For the 2023-24 kharif season, a subsidy of 38,000 crore was announced. The FY25 budget allocated 1.64 trillion for fertilizer subsidy, lower than the revised estimate of 1.88 trillion allotted for FY24.

Though India is moving toward gaining self-sufficiency in urea, it still depends on imports to meet demand for rock phosphate, the key raw material for DAP and NPK fertilizers.

India is dependent on imports for muriate of potash and imports nearly 5 million tonnes of phosphate rock, 2.5 million tonnes of phosphoric acid and 3 million tonnes of DAP annually.

Since its inception in 2010, the NBS scheme has played a pivotal role in ensuring farmers have access to essential nutrients at subsidized prices, now expanded to cover 25 grades of P&K fertilizers for both rabi and kharif seasons.

 

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