The Union ministry for information technology is preparing a cabinet note seeking extension of the 10-year tax holiday currently being enjoyed by units in Software Technology Parks of India(STPI), according to the Union IT minister Mr Dayanidhi Maran.

Mr Marans comments come at a time when the sunset clause(for tax-exemption) for these units comes to a close in March 09.

He was talking to the media on the sidelines of the signing of a memorandum of understanding(MoU) between SemIndia and IMEC, a Belgian nanotechnology and nano-electronics research institute.

Queried about the proposed semi-conductor policy, Mr Maran said his department was seized of the issue and that the policy being proposed would see support being extended to cutting-edge technology in this space as technological obsolence was major issue.

Mr Maran said that it was not just semi-conductor companies, but even Indian researchers settled in the US who were keen to set up a fab city(fabrication city) in India.

The MoU signed by SemIndia envisages support being given IMEC for setting up a semi-conductor foundry by 07 with a production ramp-up in 09. The partnership aims at developing 130nm and 90nm chip-sets targetting markets like mobile phones. We would also collaborate on process for 65 nm and 45 nm products, said Vinod Agarwal, founder chairman and CEO of SemIndia.

Mr Gilbert Declerck, president and CEO of IMEC said that the institute was also in talks with another Indian institution to sign a MoU on the lines of what it has done with SemIndia.

The MoU was signed in the presence of Union finance minister P Chidambaram and the Belgian prime minister Mr Guy Verhofstadt. IMEC headquartered in Leuven in Belgium had revenues of euro 197m in 05.