The Kerala government is set to unveil the country’s first-ever policy framed to encourage start-up companies. As part of the policy, reviewed by FE, Kerala will invite leading venture capitalists from Silicon Valley, Israel, Russia, China, etc, to partner the state in setting up angel investment funds.
The policy has also outlined handsome tax-breaks. The necessary orders regarding setting up these funds will be issued by December 31 this year and three such early-stage investment funds will be made operational by March 31, according to chief minister Oommen Chandy. The programme ? Startup Kerala ? will roll from January, 2013.
In an exclusive interaction with FE, Chandy said his government’s ambition is to brand Kerala as one of the top five IT start-up destinations in the world by 2017. ?Kerala’s youngsters are no longer the rebellious kind seen in the ’80 and ’90s. They want to create value in the state and achieve. We want to support them, and hence this policy,? he said.
The returns from the initial three rounds will be reinvested to start more such funds in the state. ?This move is expected to attract the best of Indian start-ups to set up their base in Kerala. We are looking to create 3,000 IT product start-ups in Kerala by 2020,? the CM said.
?I would like Kerala to be known as a state renowned for innovation and product start-ups,? he added.
For too long, investors have stayed away from the state, thanks to militant trade unionism. ?We want to change this image,? Chandy said. ?We are trying to ensure that our youngsters do not have to go overseas in search of jobs. For too long, Kerala had this mindset of going to the West Asia and others parts of the world to earn a living. Our new start-up policy will encourage youngsters to become job givers and not job seekers. This requires a big shift mindset and the youth of Kerala are ready for this image make-over.?
Its much-touted IT SEZ Smart City ? hailed as a breakthrough investment vehicle for Kerala ? had got mired in several political controversies and is yet to deliver the desired results. In this backdrop, the state’s new initiative to support youngsters is viewed as the last throw of the dice to create a climate of entrepreneurship. ?The non-resident Malayalis, who have seen the world, want to throw their weight behind this,? said state IT secretary PH Kurien.
The draft of the start-up policy has details about the need to provide financial incentives. With its focus on creating a robust IT product ecosystem, the state has to create the right tax framework.
The policy is looking at zero rating VAT on goods supplied to the incubators (similar to the current exemption in SEZs); exemption from VAT on sale or leasing of goods by the incubator similar to service tax exemption; exemption from stamp duty payment; and exemption from payment of duty and surcharge on electricity charges. The relevant government orders in this regard would be issued by the department of finance by December 31, the draft said.
The government-owned IT and industrial parks at Kinfra, Technopark and Cyberpark are designated as co-nodal agencies for creating incubation infrastructure.
As part of the policy, host institutes of Technology Business Incubators (TBIs) , recognised by the National Science and Technology Entrepreneur Development Board, will be entitled for lease of land and space for setting up infrastructure at government owned IT parks.
A lease holiday will be granted for an initial period of five years. The state planning commission has allocated funds to the Kerala State Industrial Development Corporation (KSIDC) for setting up incubation infrastructure in engineering colleges. The scheme for this purpose would be announced by December 15.
?One can’t become great innovators by being rooted in Kerala. Our youngsters need to travel to Silicon Valley to understand how things work,? said Sanjay Vijaykumar, chairman of Startup Village, an incubation zone in Kochi backed by the state government and mentored by Infosys co-founder Kris Gopalakrishnan.
Hence, the plan is to send at least five youngsters every year from the incubation zone to the Valley. ?They got to see the big tech entrepreneurs of the world in flesh and blood,? Vijaykumar added. ?Only then would they start to believe in themselves.?