NEW DELHI, July 15 -- The Union Cabinet on Wednesday approved seven major decisions covering infrastructure, semiconductor manufacturing, mobile phone production, fertiliser and railway projects. The package includes Semicon 2.0, the Mobile Phone Manufacturing Scheme (MPMS) and the National Investment Policy for Urea-2026, with a combined outlay of Rs 2,19,353 crore.
Two major manufacturing initiatives with a combined outlay of nearly Rs 1.9 lakh crore (USD 22 billion) are aimed at expanding India's semiconductor ecosystem, scaling up mobile phone production and strengthening its position as a global electronics manufacturing hub.
The government approved the Rs 1.27 lakh crore (USD 14.6 billion) Semicon 2.0 programme to accelerate semiconductor design and manufacturing capabilities, alongside the Rs 62,500 crore Mobile Phone Manufacturing Scheme (MPMS) aimed at increasing domestic production, boosting exports and deepening local value addition in the mobile phone industry.
The Union Cabinet also approved the National Investment Policy for Urea (NIPU-2026) to encourage fresh investments in gas-based urea manufacturing and achieve self-reliance in the country's most widely consumed fertiliser. The policy aims to facilitate the establishment of 8-9 new gas-based urea plants with a combined production capacity of 10 million tonnes and replaces the 2012 New Investment Policy with revised incentives.
Information and Broadcasting Minister Ashwini Vaishnaw said India's urea demand is growing by around five per cent annually due to changes in cropping patterns, increased sowing area and record agricultural production. The country currently produces around 30 million tonnes of urea against an annual requirement of 40 million tonnes, making imports of about 10 million tonnes necessary. He said six plants commissioned under the earlier policy had significantly reduced import dependence, while the proposed new plants would make India self-reliant in urea production.
The revised framework separates fixed and variable costs for greater transparency, introduces a return on equity band of 12-16 per cent and mitigates foreign exchange risk by converting fixed costs into rupees after four years based on prevailing exchange rates. The government estimates savings of more than Rs 250 crore for every plant established under NIPU-2026 compared with the previous policy. Vaishnaw said the incentive structure will remain the same for projects promoted by private companies, public sector enterprises and cooperatives.
The Cabinet also approved two highway projects for Varanasi involving a combined investment of nearly Rs 25,500 crore to ease traffic congestion and improve connectivity across the city. One project involves the construction of a 43.218-km elevated corridor linking NH-31 with the Varanasi Ring Road along the Varuna River at a cost of Rs 10,998.32 crore. The second is a 46.039-km corridor connecting NH-19 with the Ring Road along the Ganga at Rs 14,447.64 crore. Both projects will be implemented by the National Highways Authority of India under the Hybrid Annuity Model.
According to the government, the projects will reduce travel time between NH-31 and Kashi Railway Station from about 40 minutes to 20 minutes and cut travel time across the NH-19 corridor from around 60 minutes to 20 minutes. They will also improve access to Lal Bahadur Shastri Airport, major railway stations, Ramnagar Port, Kashi Vishwanath Temple, Banaras Hindu University, Namo Ghat and other key destinations, while supporting tourism, logistics and economic growth in eastern Uttar Pradesh.
The semiconductor programme builds on the first phase of the India Semiconductor Mission and will focus on six key areas: chip design, semiconductor equipment and materials, fabrication facilities, advanced packaging and testing, research and development, and talent development.
"The Union cabinet under the leadership of Prime Minister Narendra Modi has approved Rs 1.27 lakh crore for Semicon 2.0," Minister for Electronics and Information Technology Ashwini Vaishnaw said at a news briefing.
The government expects the new scheme to attract investments of around Rs 4 lakh crore and lead to semiconductor production worth Rs 2 lakh crore during the scheme period. India is also expected to export chips worth Rs 1 lakh crore. "Guidelines of the schemes will be published in about 20 days," the minister said.
Vaishnaw said the scheme will support the indigenous production of chips designed in India with domestic ownership.
In contrast to the previous plan, the new scheme will provide incentives in the form of grants against equity or link them to royalty-based funding.
"The government will mimic proposals of private investors in the chip firms," a MeitY official said.
The government has reduced incentives for setting up new chip plants from 50 per cent to 40 per cent for silicon fabs and to 35 per cent for other fabs.
The Union Cabinet also approved the Rs 62,500 crore Mobile Phone Manufacturing Scheme to provide production-linked incentives to manufacturers over five years from FY27 to FY31, Vaishnaw said.
"We expect to more than double the export of mobile phones to around Rs 15 lakh crore under the new scheme from around Rs 7.5 lakh crore under the previous scheme," the minister said.
Incentives will range from 2.25 per cent to 5 per cent on eligible mobile phone sales, with additional support for domestic sourcing of key components and for Indian companies investing in product design and research.
The government expects the mobile phone scheme to drive cumulative production of around Rs 39 lakh crore during its tenure, significantly increase exports and generate about 60,000 direct jobs.
India has emerged as the world's second-largest mobile phone manufacturer by volume, with 99.2 per cent of mobile phones used domestically now manufactured within the country.
Mobile phones became India's largest exported product category in 2025, overtaking traditional export segments such as diesel fuel and cut diamonds.
Semicon 2.0 aims to encourage the development of semiconductor intellectual property, commercial and strategic chip designs, and manufacturing capabilities for critical components required across sectors. The programme will provide support to companies involved in semiconductor machinery, materials, chemicals and gases while seeking to attract additional fabrication plants to India.
A government statement issued after the Cabinet meeting said the initiative would strengthen supply chain resilience and help establish India as a key semiconductor design and manufacturing destination. The country's first semiconductor fabrication unit is expected to begin operations in 2028.
The programme also seeks to expand Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) capabilities, while advancing research into more sophisticated chip technologies.
India's semiconductor push has already resulted in approvals for 12 manufacturing projects with a combined investment of more than Rs 1.64 lakh crore.
These include a silicon fabrication plant, a silicon carbide facility, an integrated gallium nitride micro-LED display unit and nine packaging facilities catering to sectors such as automobiles, telecommunications, consumer electronics, aerospace and industrial equipment.
Three approved projects by Micron, Kaynes and CG Semi have begun commercial production, while another facility is expected to start operations in 2026. The first phase has also supported 24 semiconductor design projects by startups and MSMEs, with 105 companies receiving access to industry-standard Electronic Design Automation tools.
Published by HT Digital Content Services with permission from Millennium Post.