The National Deep Tech Start-up Policy (NDTSP), aimed at giving a boost to early-stage technologies and their commercialisation, would go to the cabinet soon for approval, a senior official said, adding that the final draft of the policy is ready.
The draft has been approved after the meeting with the Empowered Technology Group (ETG) which is headed by the Principal Scientific Advisor to the government of India earlier this month.
ETG which was set up in 2020 to lay down, coordinate and oversee procurement and induction of technologies, research and development in technologies that require large outlays and advise on government’s technology development programmes.
“The National Deep Tech Start-up Policy will be an umbrella scheme and using its guidelines ministries can frame schemes for the start-ups working on cutting edge technology in sectors they administer,” the official who did not wish to be named said.
The policy as such will not have a budget or funding plan but will have ideas to promote start-ups working on new technologies, he added. The policy could be announced in the coming Union Budget.
The policy will set the benchmark for identifying a deep tech start-up and list the support they could be provided. According to the draft of the policy, deep tech start-ups are early stage start-ups based on scientific and engineering advancements that are yet to be developed for any commercial applications. Unlike other start-ups that are differentiated on the basis of business models and can be replicated, deep tech start-ups are differentiated by technology.
By the nature of functions the deep tech start-ups take longer to mature and need large doses of capital. The draft of the policy talks of a new dedicated deep tech capital guidance fund which should pool investments from the government and private sources. This fund should be in the nature of Funds of Funds – a fund that makes downstream investment in smaller sector- specific funds. The tenure of these funds should be longer looking at the longer gestation period of the deep tech start-ups.
It also recommends differentiated treatment of deep tech start-ups and reducing their costs by allowing them exemptions or reduced customs tariffs on imported equipment, machinery, and raw materials especially for those companies operating in manufacturing or technology-intensive sectors.
The early-stage funds should be of higher quantum and deployed for longer durations of more than10 years. It is of the view that the first or early-stage seed funds to the inventors should be grant based, as in the case of the international ecosystems because equity or debt-based seed funds at this stage would dissuade inventors from participating, it says.
There is already a Fund of Funds for Startups (FFS) Scheme to provide long term financing to startups, The was approved and established in June, 2016 with a corpus of Rs. 10,000 crore, with contribution spread over the 14th and 15th Finance Commission Cycle or till 2025-26 based on progress of implementation. The draft policy seeks to create a separate window for deep tech companies.
There are more than 10,000 deep tech start-ups in the country and 98% of them are funded by international sources. The policy draft has recommended fiscal incentives to attract domestic venture capital and angel funds if they allocate a certain percentage of their corpus to deep tech startups.
Beyond funding and taxation matters, the draft policy has recommendations on nurturing research, development and innovation, strengthening the intellectual property regime, enabling shared infrastructure and resource sharing, creating conducive regulations, standards, and certifications, attracting human resources and initiating capacity building, promoting procurement and adoption.
