Steps to foster innovation

By: |
February 13, 2015 12:49 AM

Budget is an opportunity to boost R&D in the country

Research & development now assumes special significance in the context of the government’s effort to make India a manufacturing and innovation hub. India cannot make a mark in cutting-edge fields like defence and electronics manufacturing without targeted incentives and an enabling environment. Those with a stake in R&D and innovation are looking to the coming budget with a lot of expectations. Some specific areas where the finance minister could act this time, as suggested at Ficci’s Global R&D Summit 2014, are listed here.

Tax benefits & subsidies

* Currently tax benefits on R&D are applicable only for expenses incurred in India. The benefits should be extended to expenditure incurred by Indian companies out-of-India (i.e for sponsored research projects, joint development, etc.)

* Income tax benefits are not available on R&D infrastructure (like buildings) even if the facility is DSIR approved. This may be allowed.

* Pro-active measures should be taken to educate industry about the incentives available. Many entrepreneurs, for example, shall not be knowing that the government provides a weighted tax deduction @200% on expenditure (other than land & buildings) incurred on approved in-house R&D facilities of companies (Sec 35(2AB) of the IT Act.)

* Service tax on R&D services be exempt on DSIR recognised institutes, along the lines of excise and customs duty.

* Tax benefits available to businesses—including tax exemption on R&D investment at flat rate and accelerated depreciation on capital investment for R&D, etc—are attractive for relatively large businesses which are encouraged to make higher R&D investments. But these are not meaningful for small entities/individual inventor-cum innovators. Grants/subsidies for capital equipment are required for the SME sector.
Customs & excise regulations

* Currently, excise duty exemption is available only for products that are based on valid Indian patents. This should applicable to products where the manufacturing process is patent protected.
* Simplify the process for custom clearance of tailor-made pilot plants or prototypes that are being imported.

IPR regulations
* The recent changes in patent system include a three-tiered fee structure (for individuals, companies and small entities) with relaxation of patent filing fees for small entities. More such changes are needed to encourage small entities in filing IP rights. For example, mechanisms such as utility models and inventors’ certificates will provide hassle-free protection to ideas from inventors, who cannot afford the time and cost involved in patent prosecution or enforcement.

Innovative institutional mechanisms
* Research and technology development programmes at publicly funded institutes have to be aligned to industry needs. Formal feedback mechanisms may be institutionalised at such institutes. Advisory boards may be formed, with industry nominees.

* Set up dedicated technology transfer offices at research institutes to market technologies & inventions.

* Academic institutions should be advised to link industry-funded research as part of their post graduate programmes.

* Provide tax benefits to industry for setting-up Centre of Excellence (CoE) in their chosen academic institution /university.

* Provisions should be put in place to allow such CoEs to import certain critical / restricted items/equipment from abroad and use them as a common facility for supporting industrial research.

* Promote incubators, clusters and R&D/technology parks in close proximity to established universities/engineering colleges for rapid development of technopreneurship and innovation.

PPP & new business models
(i) Recognise funding and operational support for R&D infrastructure at public research institutions as a valid CSR spend for corporates.
* Industry scholarships to encourage higher studies in sciences/engineering should also count towards valid CSR spend.
* Introduce favourable schemes to encourage for-profit, social enterprises based on innovative technologies and new business models.

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