Policy Pangs! Fabcity-Semindia goes for Arm Twisting Tactics!! ...15.11.06

The Semi Conductor Policy seem to be on its way! The current expectation is that the policy would see the light, by early December.

As you must be aware, the US$3 Billion investment into the stretch of land along Srisailam Highway after Airport, is fully dependent on the Govt. of India's Policy for Semiconductor Fabrication. The Govt. had entered into agreement with Semindia for developing Fabcity in February 2006. Later in June 2006, Foundation Stone for Fabcity was laid. Semindia will be the Anchor Customer with several other large multinationals talking up space here.

AMD would be the Principal technology partner for Fabcity. Semindia has entered into agreements with Flextronics, IMEC-Belgium, BOC etc. Several Large agreements and contracts are expected to be finalized as soon as Policy is released.

The Policy was to be announced soon after the signing of MOU in February, allowing Semindia to finance the equity and debt for the Project. However, the Govt. has been struggling to strike balance between expectations of the industry and possible loss of revenue due to incentives offered. Issue of technology obsolesce also has been raised.

Without clear guidelines and agreement / commitment on taxation, subsidies, incentives etc. the Financial Institutions and Investors would not come forward to commit funds. Hence, the soon to be released Policy, is the vital fulcrum on which the project would get founded.

Last few weeks has seen consistent reports from the Center, suggesting that the Policy would be released soon. A high powered technical committee headed by Mr. Ratan Tata had been working on the Policy. With the Policy expected to be released shortly, Semindia has raised ante and has been trying to arm twist the Govt. and influence it to include liberal incentive regime in the Policy.

Last few days has seen Mr. Vinod Agarwal and Mr. Bob Kondamuri shouting from roof tops that they would run away with Fabcity!! Well it's a known fact, that they have invested little and are in fact TOTALLY AND FULLY DEPENDENT on Govt. support whether in India or abroad.

Apart from thousands of acres to be doled out, they want the Govt. to chip in with US$260M and unheard of concessions. We all know that no foreign Govt. would handout precious land like the way we do. Also the performance conditions put up by any foreign Govt. would be extremely stringent. Considering this, its obvious that Semindia is only trying to show off. They will have to accept the Terms of the Policy and go ahead with development.

Semindia would try to get maximum benefit. There is nothing wrong in this. In India, policies are always "influencable" and unless you shout and deal underhand, you would never get anything!

Lets wait and watch the Fun! There should be more fire works soon.

I also wish to alert you that as soon as the air clears, there would be a run on land price again on Srisailam highway. Be ready!!