The government of Karnataka said on Thursday it welcomed a proposal from Apple Inc to begin initial manufacturing operations in the state, in a sign the tech company is slowly moving forward with plans to assemble iPhones in the country.

“Apple’s intentions to manufacture in Bengaluru will foster cutting edge technology eco system and supply chain development in the state, which are critical for India to compete globally,” the Karnataka government said in a statement.

A source familiar with the matter told Reuters, however, that no deal, or memorandum of understanding had so far been finalised with the Karnataka government.

Apple has been asking for sops from the Indian government to start making iPhones in the country and as well as its own retail chain.

However, Union finance minister Arun Jaitley in his budget speech announced a record figure of Rs 745 crore under modified special incentive package scheme (MSIPS) to boost electronic manufacturing. In a caveat, the government also has proposed a 2% special additional duty on import of PCBs. PCBs or in simple words printed circuit boards makes up for 20-30% of a smartphone’s cost and is generally imported as India still doesn’t have fabrication units to manufacture them domestically.

The person, who asked not to be named, said if Apple did go ahead with plans to begin assembling the iPhone, it was likely to do so initially at a plant being set up by its Taiwanese manufacturing partner Wistron Corp at Peenya on the outskirts of the tech hub of Bengaluru, Karnataka.

Cupertino, California-based Apple, is keen to assemble its phones in India, one of the world’s fastest growing smartphone markets.

Apple representatives met with central and state government officials in India last week, as it is lobbying hard for a raft of tax and sourcing concessions, before it begins to assemble iPhones in the country.

Following the meetings, Apple said it appreciated the open and constructive dialogue it held with Indian officials, around the expansion of its local operations in the country.