The Finance Ministry is willing to offer Intel a $110 million grant in exchange for a commitment by the chipmaker to keep operations in Israel longer than previously planned.

On orders from Finance Minister Yuval Steinitz, a team headed by ministry director general Haim Shani is seeking longer-term commitments from Intel, and promises of employment for more people.

Intel plans to expand its plant in Kiryat Gat at an investment of $2.7 billion and initially requested a $400 million government grant in return for a commitment to employ 400 new workers.

At one point, the company came to an understanding with the Industry, Trade and Labor Ministry headed by Benjamin Ben-Eliezer for $200 million in government support if it employed about 250 new workers..

However, the treasury rejected the deal, and is looking for a commitment from the chipmaker to employ more workers and for more than four years.

Some sources say Intel has committed to increase employment at Kiryat Gat by 400 workers at its expanded facility.

Although the Finance Ministry's budget division is prepared to provide $110 million, sources familiar with the matter note that Intel considers its agreement the Industry Ministry as a binding government commitment.

The Finance Ministry does not accept that position, because the deal was not coordinated with itself, explain officials: the Industry Ministry has no budget for such a grant on its own.

In any case the Industry Ministry itseld did not view the understanding with Intel as binding on the government, which is why its recommendation was sent on to Prime Minister Benjamin Netanyahu for approval.

Treasury officials realize, however, that the government wants to keep Intel in Israel; it wants to maintain the country's standing as a high-tech manufacturing center and Intel's second largest production center after the United States. Many of Intel's most important chips have been developed in Israel.

Intel declined to comment for this report.