In a clear push for disciplined growth, the Centre has decided to retain the pari passu funding model in the next phase of the India Semiconductor Mission (ISM 2.0). The move reflects a focus on tighter fiscal management while continuing efforts to build a strong domestic semiconductor ecosystem.
Pari passu, a Latin term meaning “on equal footing”, refers to a funding approach where government incentives are released in proportion to a company’s own capital investment. Under ISM 1.0, the Centre committed 50% fiscal support for project costs, but funds were disbursed only as companies invested their share. This ensured that public funding progressed alongside private spending, rather than being given upfront.
Officials said this structure helps reduce risks such as cost overruns, delays, and unused funds. “Because of the pari passu route, companies are seriously investing in this sector and global companies too are joining hands with them,” a senior official said.
Launched in 2021 with an outlay of ₹76,000 crore, ISM 1.0 has seen strong participation. As of May 5, 2026, total investment commitments have reached ₹1.64 lakh crore, exceeding the original target of ₹1.60 lakh crore. The government credits this success partly to the discipline created by the co-investment model.
The policy is part of a larger strategy to reduce dependence on imported semiconductors. Officials indicated that once domestic fabrication and packaging units become fully operational, steps may be introduced to encourage or mandate the use of ‘Made in India’ chips across industries. The goal is to build a resilient supply chain.
Work under ISM 1.0 is ongoing. The Union Cabinet has approved 2 more projects by Crystal Matrix Limited and Suchi Semicon, taking the total number of approved projects to 12. These include India’s first commercial mini/micro-LED display facility based on gallium nitride (GaN) technology and a semiconductor packaging unit, both planned in Gujarat.
Ashok Chandak, President of India Electronics & Semiconductor Association (IESA) and SEMI India, said ISM 2.0 marks a shift from building manufacturing capacity to creating a complete semiconductor ecosystem. “The next phase should focus on equipment, materials, specialty chemicals, design-led innovation, IP Creations, advanced displays, and talent development,” he said.
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