India Business
Government order paves way for Fab City project
Apr 29, 2007 - 6:13:33 PM

Hyderabad, April 29 - With the Andhra Pradesh government issuing an order allotting 100 acres of land to SemIndia Inc, decks have been cleared for the proposed $3 billion semiconductor manufacturing Fab City here.

Acting cautiously in view of the controversy following certain allegations made by opposition Telugu Desam party against the promoter, the government has made it clear that it would play a pivotal role in the development of India's first chip manufacturing facility rather than leaving the entire responsibility to SemIndia.

The much-awaited government order - issued late Saturday has asked SemIndia to play the role of an anchor industry on the 100 acres. The government will allot the remaining 1,100 acres in Fab City to other developers.

SemIndia has been asked to develop infrastructure for attracting companies in the land allotted to it within five years. Assembling, testing, marketing and packing units will have to be set up with an investment of $75 million within 18 months providing employment to 2,000 people.

Under Phase II, a semi-conductor chip-manufacturing unit - will have to be set up in three years thereafter, engaging another 1,000 people.

Under Phase III, an advanced semi-conductor plant with employment potential of 5,000 will have to be established within 5 to 7 years.

The government had announced in 2006 that it would allot 1,200 acres of land near the upcoming Hyderabad International Airport at Shamshabad for Fab City. Under the memorandum of understanding - signed with SemIndia, the government had agreed to allot 300 acres but in the GO the area has been further reduced to 100 acres.

SemIndia has been allotted 100 acres of land on 88 years lease at a nominal rate of Rs.1 per acre per year. It has been offered other concessions including subsidised electricity and water supply.

The GO was issued days after the main opposition Telugu Desam party raised doubts about the project and SemIndia president and CEO Vinod Kumar Agarwal was asked to rush here from the United States to allay the apprehensions.

Blaming the government for the delay in launching the project, Agarwal had told a news conference on April 25 that the work could begin only after land was handed over to his company.

Agwaral has welcomed the government order. 'This will help us to start executing our projects immediately. We will also work along with APIIC - to plan and implement the Fabcity as a world-class semiconductor manufacturing cluster. This will also help the state of Andhra Pradesh to emerge as the leader of high tech manufacturing,' he said.

The government has agreed to supply a maximum of 1.2 million units of electricity - a day to the company at Rs.1.85 a unit for 15 years. Similarly, 5 MGD - will be supplied for 15 years at Rs.15 a kilolitre.

Also, the actual amount of value added tax - paid by SemIndia on sales of products will be fully reimbursed for the first eight years and 50 percent for the next seven years.

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