New Semicon 2.0 Rules Tighten Asset Control
On Thursday, the Ministry of Electronics and Information Technology released updated guidelines for the Semicon 2.0 programme, a ₹1.27‑lakh‑crore initiative aimed at bolstering India’s semiconductor ecosystem. The most striking change is a prohibition on selling or mortgaging any project asset until the entire project declares commercial production.
### Asset Restrictions Until Commercial Production
Under the new rules, a chip‑plant company may not dispose of or create a mortgage, lien or charge on its assets in the ordinary course of business without prior nodal‑agency approval. The restriction applies until the project’s commercial production is formally announced.
### Three‑Year Production Mandate
In line with the incentive framework, units receiving fiscal support must stay in commercial production for a minimum of three years from the date commercial output commences. A written undertaking is required to confirm this commitment.
### Eligible Capital Expenditure Clarified
The guidelines clarify that expenditures on land development, temporary structures, site offices and other temporary facilities do not count as eligible capital expenditure under Semicon 2.0. Likewise, costs for technology transfer, interest during construction (IDC) and research and development are excluded.
### Equity and Control Requirements
Applicants and promoters must maintain at least 51% of the total equity share capital with equivalent voting rights in the project company throughout the fiscal support agreement, including the three‑year post‑commercial‑operation period. The controlling entity must be identified at the application stage, and any change in shareholding must be reported to the nodal agency.
### Focus on Three Pillars
While the programme has six pillars—design, machines & materials, fabs, ATMP/OSAT, R&D and talent development—guidelines have been issued only for the machines & materials, fabs, and ATMP/OSAT pillars. Companies in these areas can also tap production‑linked incentive (PLI) benefits for domestically sourced components and sub‑assemblies.
Why These Rules Matter
The restrictions aim to safeguard the integrity of the incentive pool and ensure that projects remain operational and productive. By tying asset control to commercial output and mandating a three‑year production window, the government seeks to prevent premature divestments that could undermine the long‑term viability of India’s semiconductor manufacturing base.
What to Watch
- **Implementation Timeline**: Companies will need to align their asset management and financing plans with the new restrictions. - **Further Pillar Guidelines**: The government may release detailed rules for the remaining pillars—design, R&D, and talent development—soon. - **Compliance Monitoring**: The nodal agency will oversee adherence to equity and shareholding requirements, potentially affecting ownership structures of existing and upcoming projects.
These developments underscore the Indian government’s commitment to creating a robust, self‑sufficient semiconductor ecosystem while maintaining stringent oversight over the allocation of its substantial fiscal support.