''The facility will place heavy demand on water resources which the State can’t afford''

Karnataka, more specifically Bangalore, is not in the race to host the country’s first electronic chip fabrication unit, a senior government official told The Hindu on Wednesday.

“Much as we would have wanted the prestigious project to be based in Bangalore, which has perhaps the best ecosystem for electronics manufacturing in the country, we would be unable to host it because of the heavy demand it would place on water resources,” I.S.N. Prasad, Principal Secretary, IT, Biotechnology and Science and Technology, told The Hindu.

The Union government had invited expressions of interest from investors and technology service providers in 2011 for setting up the unit.

On the sidelines of a workshop on regulatory and operational issues, organised jointly by the department and the Manufacturers’ Association for Information Technology (MAIT), Mr. Prasad said the establishment of such a facility in or near Bangalore would place an “inordinate demand, both in terms of quantity and quality of water, which we (the State government) cannot afford.”

Referring to the fact that a chip fabrication unit requires large quantities of pure water, he said the State government was concerned that diversion of such quantities for chip manufacturing unit would starve other industries in and near Bangalore. Mr. Prasad said Gujarat and Greater Noida were among the prime contenders for the project.

The establishment of an electronic chip manufacturing unit is highly capital intensive. Industry sources said the required investment would range from $2 billion (about Rs. 12,800 crore) to $6 billion (about Rs. 38,400 crore), depending on the range of chips that could be produced at the facility. Earlier this month, Ajay Kumar, Joint Secretary in the Department of Electronics and Information Technology, told The Hindu that the government was likely to finalise the company that would be awarded the prestigious project “very soon.”

The government has already announced a slew of concessions that would be available to not only the fabrication units but to suppliers of equipment and components that would feed it.

Bangalore was among the front-ranking candidates because it already is home to over 85 chip designing companies and has more than 330 research and development companies focussed on this line of business. Anish Ramachandran, director, Operations and Market-enabling Solutions, Intel, pointed out that five major R&D companies contributed to more than 10 per cent of Indian IT exports last year. He pointed out that the number of IT companies in Bangalore had increased from 13 in 1991 to 2,200 presently, as an indication of the city’s vitality.

Import dependence

Earlier, addressing the workshop, MAIT president J.V. Ramamurthy observed that import of electronic items was expected to soon “overtake” the national oil import bill. Arguing for “changes” in policy, he pointed out that the average import content in electronics consumed in India was more than 85 per cent. “The establishment of a chip fabrication unit will give a boost to manufacturing activity,” he said. Although Karnataka was a pioneer in e-governance it had been lagging behind other States in the last few years, Mr. Ramamurthy said.

Minister for IT, Biotechnology and Science and Technology S.R. Patil said the scheme offering Preferential Market Access to Indian companies in procurement would result in employment generation. He suggested that Indian companies learn from Chinese firms. “Chinese telecom (equipment) companies used their domestic market to launch operations globally,” he said.