Under the Rs 1.27 lakh crore Semicon 2.0 scheme, the government has barred companies from selling or mortgaging assets until commercial production begins. Investors should note this move aims to ensure long-term manufacturing commitment, potentially restricting financial flexibility for project applicants who previously relied on asset-based financing.
The Indian government has introduced strict conditions for the Semicon 2.0 scheme, a large-scale program designed to expand the country's semiconductor ecosystem. New guidelines issued this week prohibit companies receiving government incentives from selling, mortgaging, or creating any liens on project assets until the declaration of full commercial production. This policy effectively stops developers from liquidating assets or using them as collateral to raise debt in the early stages of project development.
Stricter Conditions for Asset Ownership
Beyond asset restrictions, the policy enforces rigid ownership requirements. Applicants must maintain at least 51% equity share capital, along with equivalent voting rights, throughout the term of the fiscal support agreement and for three years after commercial operations begin. Any planned change in this shareholding structure must receive prior approval from the designated Nodal Agency. These rules appear designed to prevent companies from bringing in external partners or changing ownership structures prematurely after securing government backing.
Eligibility and Long-Term Focus
The guidelines also clarify that certain costs do not qualify for incentives. Expenses related to land acquisition, technology transfer, and research and development will not be considered eligible capital expenditure. This suggests the government intends to direct fiscal support primarily toward core machinery and the construction of physical facilities, rather than subsidizing land or intangible assets. By excluding these costs, the government is narrowing the scope of what it considers a core semiconductor investment.
For investors, these rules carry specific implications. The government is clearly prioritizing serious, long-term industrial commitment over short-term financial maneuvering or quick exits. By banning the mortgaging of assets, the policy restricts companies from using the incentive-backed facilities to raise external funds or restructure finances during the setup phase. This creates a higher barrier to entry for firms that depend on aggressive capital recycling or frequent changes in ownership structure to fund large-scale manufacturing expansion.
Impact on Project Funding
The Semicon 2.0 program, which covers areas including chip design, machinery, fab construction, and ATMP/OSAT development, is central to India's push for self-reliance in electronics. Companies now need to ensure their project funding models align with these strict ownership and asset-holding rules before committing to large-scale investments. The ability of an applicant to maintain its shareholding and asset integrity will be a key indicator of its project's long-term stability. The most important monitorable for investors will be how applicants adjust their funding plans to comply with these restrictions. Future announcements regarding project timelines and compliance with these ownership guidelines will be critical to evaluating the feasibility of individual manufacturing projects.