The government has permitted foreign companies to make bids for component procurement through the subsidiary route in direct competition with domestic companies for supply of semi-conductor products.

The preferential market access policy was rolled out to support domestic semiconductor companies. But on Tuesday, joint secretary to government of India, ministry of communication and tnformation technology, department of information technology, Ajay Kumar, said, “There will be no compromise in price and quality as far as the procurement of semi-conductors are concerned”.

On Monday, union minister for telecom, Kapil Sibal said, the government procurement policy was aimed to help boost domestic semiconductor companies. Secretary to department of information technology, R Chandrashekar, said, “Under the preferential market schemes, major government projects like National Optical Fibre Network (NOFN), National Knowledge Network (NKN) and Aakash, will drive the demand for domestically produced electronic products”.

Ajay Kumar said the domestic procurement policy would also enable wholly owned subsidiaries of multi national companies to bid for the government procurements. Speaking to Financial Chronicle, he said he can’t quantify about the size of market that will be developed for Indian semiconductor industry, but it will be about $5 billion to $10 billion annually and $50 billion as a whole.

When asked about the idea of wholly owned subsidiaries of MNCs being included for government domestic procurement, he said, “It is not that they will be given everything. We will administratively decide it on a case on case basis”. The investment climate for semiconductor is also very weak.