The government has notified the much-awaited Semiconductor Policy providing capital subsidy to the investors setting up chip manufacturing units in India.

The government expects to attract an investment of Rs 24,000 crore (Rs 240 billion) in the next three years. The country is likely to have two-three fab units at an investment of $2-3 billion each by 2010, Minister for IT and Communications Dayanidhi Maran said on Thursday.

"An appraisal committee to be headed by additional secretary in the Department of IT will be formed very soon. The committee will receive expression of interest from interested parties and will submit its recommendations to the government," he said.

Maran said now that the policy has been notified, he will reopen negotiations with Intel and other companies to explore possibilities of them setting up units in the country.

World's largest chip manufacturer Intel had been waiting for the semiconductor policy to take decisions on its India plans and had in the meantime selected Vietnam for a facility.

The Union Cabinet had earlier approved the policy. The subsidy will be in the form of tax breaks and interest-free loans. The incentives will be 20 per cent of the capital expenditure during the first 10 years, but the companies have to invest a minimum Rs 2,500 crore (Rs 25 billion). Such units will have to be set up in Special Economic Zones to avail this benefit.

If the unit is located outside SEZ, the incentive would be 25 per cent of the capital subsidy in the first 10 years and countervailing duty on capital goods would be exempted.

The threshold investment limit for manufacturing other products like storage devices, micro- and nano-technology

products, assembly and testing of all these products and Organic Light Emitting Diodes is Rs 1,000 crore (Rs 10 billion).

India got its first proposal to start such a fab from a group, including Advanced Micro Devices and SemiIndia, for an investment consideration of $3 billion in 2005.

The incentives will be for the manufacture of all semiconductors, displays including liquid crystal displays, plasma displays as well as other such panels, including solar and photovoltaic cells.