Vedanta-Foxconn's semiconductor chip deal with Karnataka hits blockade over incentives: Report

Anil Agarwal-owned Vedanta and Taiwan-based Foxconn Technology Group have been in talks with the Karnataka government for setting up a semiconductor chip production unit in the state. However, the discussions have hit a blockade over incentives, according to a report in The Economic Times.

The publication citing sources said that Vedanta and Foxconn jointly want to invest $20 billion (Rs 1.55 lakh crore) in the state, but also sought back 20 per cent of the investment value or $4 billion (Rs 31,000 crore) as incentives and concessions.

The joint venture reportedly made the demand on the basis of back-of-the-envelope calculations on indirect tax revenues that the Karnataka government is expected to generate from the deal in the long run. However, the Bommai government is unsure about the quantum of sops sought, which it finds "steep", the report added. While the Karnataka govenment had assured the two companies of logistical support like suitable location, adequate water and electricity, the joint venture is simultaneously discussing with Gujarat, Maharashtra and Telangana hoping for a better deal, the report said.

“We are in discussions with them, including Karnataka, as part of a transparent process to arrive at a viable win-win proposition for all the stakeholders in the fabs…,” a Vedanta spokesperson told the publication.

In a race to become India's first chip maker, Vedanta had sought 1,000 acres (405 hectares) of free land from states and other incentives for its $20 billion foray into semiconductor and display manufacturing, sources had told Reuters. Though Vedanta is seeking federal incentives under a Modi programme offering fiscal support, it is separately asking states for 1,000 acre of land free of cost on a lease for 99 years, according to Reuters.

It needs 700 acres for its own facility, and the remainder for ancillaries.Vedanta had told state governments that its operations would help them generate $2.2 billion (Rs 17,000 crore) in tax revenues over 20 years and create up to 100,000 direct and indirect jobs, Reuters had reported.

(With agency inputs)