Agencies

The Vedanta Group’s $10 billion project to set up India’s first plant to make flat panel displays for televisions from scratch is likely to be scrapped after failing to obtain subsidies under the government’s Modified Special Incentive Package Scheme (M-SIPS), two senior executives said. The ministry of electronics and IT had turned down the application for subsidies because it didn’t meet conditions, they said.India currently imports TV display panels from China, Taiwan and South Korea, resulting in an estimated outflow of about $6 billion.While the government is trying to promote localisation of TV panel manufacturing under the Make in India initiative, this was the only project at an advanced sta-ge of implementation. Some other proposals for making such displays are said to be under evaluation.TV manufacturers undertake some end-stage assembly of panels imported in the open-cell state.Vedanta Group company Twin Star Display Technologies was expecting a 25% capital subsidy and reimbursements of duties and taxes under M-SIPS, said the executives, who were earlier attached to the project. These incentives once approved were to be available for 10 years but without them the financial viability of the country’s largest electronics manufacturing investment was called into question.Vedanta, LG Electronics and the ministry of electronics and IT didn’t respond to queries.LG was providing technology for the plant.In a communication to Twin Star in March 2019, the ministry had said it would not process the subsidy request. To qualify for M-SIPS, a project needed to have land ownership besides including details of manufacturing plans and the technology being used in the application. The ministry was also not satisfied with information provided on funding for the project, said the people cited above.The Maharashtra government had reserved 200 acres for the project and another 150 acres was earmarked for ecosystem partners near Nagpur, they said. But the land was yet to be transferred to the company since the state’s fabrication policy does not allow allotment of land until the Centre clears any subsidies sought.Twin Star had also signed a technology licensing agreement with South Korea’s LG Electronics and it could not provide specifics because there were non-disclosure agreements signed between both parties, they said.“Twin Star had stated these facts and had provided all the necessary financial closure documents but the ministry was not convinced,” one of them said. “The ministry said that it would not continue with further appraisal of the project since it lacks basic application documents, there by indicating subsidies won’t be available.This has impacted the project’s financial viability.”Incidentally, the ministry had issued a public notice last September that it will close applications seeking incentives under M-SIPS after giving due notice in case there are insufficient or missing documents to reduce the backlog. The scheme was also active until December 2018.The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi had approved Twin Star’s Rs 9,000 crore foreign direct investment (FDI) proposal in 2017.The approval had said “the project investment will be through a combination of equity, compulsorily convertible debentures, compulsorily convertible preference shares and other FDl compliant instruments”.The remaining Rs 5,000 crore for the first phase was to be funded through debt. The executives said Vedanta had disban-ded the Twin Star team, which had as many as 75 people at one time. Chief operating officer Shiv Nath had been relocated to another group company, AvanStrate Inc., as its president. Vedanta had acquired a majority stake in AvanStrate as it is a manufacturer of glass used in flat panels.Twin Star’s technology agreement with LG Electronics has lapsed, the executives said.The company was to invest $10 billion over the next 10 years. Of this, $2 billion was for the first phase, which was to have produced about 8 million television panels, meeting 40-50% of domestic demand. The project was to create 50,000 direct and indirect jobs at its peak.Capital-intensive, high-technology investments such as this are heavily supported by the governments due to their catalytic effect on industry, said the executives.