Govt to dip into innovation cess to fund industry research

The Centre is considering ploughing funds collected through the innovation cess towards research, in collaboration with industry, in three critical areas: biotechnology, pharmaceuticals and automotives.

The innovation or research and development cess, collected from industry, amounts to 5 per cent of the cost of technology imports, which include payments made for designs, drawings, and to technical personnel.

The idea of channelling the cess, which remains largely unutilised, into specific sectors emerged in a meeting between Commerce Minister Nirmala Sitharaman and Managing Director of Biocon Ltd Kiran Mazumdar Shaw, soon after the new Government was sworn in. Shaw told BusinessLine that the Minister was extremely positive about her suggestion that innovation was the key to building further expertise in areas where India is already making its presence felt.

The role on innovation “The Government needs to understand the role of innovation in economic development. For instance, Bio Genetics is the next big thing, where China is already taking the lead. If we invest now in innovation, we will start getting the fruits in a couple of decades,” she said.

The Minister is believed to have sounded out Prime Minister Narendra Modi, who is said to have responded enthusiastically.

“The Government understands that our priorities need to change with the times. There are areas which do not require the presence of the state but there are sectors which desperately need a state presence. Innovation and R&D is one such area,” Nirmala Sitharaman told BusinessLine .

The R&D cess is collected under the Research and Development Cess Act of 1986 (Act) and is payable by industrial concerns importing technology on or before making any payment towards such imports.

Failure to deploy funds According to Shaw, as much as ₹4,000 crore collected as R&D cess had to be remitted to the Consolidated Fund of India in the last 10 years because of the failure to deploy it to spur innovative research.

The Technology Development Board (TDB), under the Department of Science and Technology, receives money collected out of the R&D cess.

According to the TDB, the Government has made available a sum amounting to about 37 per cent of the R&D cess collections made over 12 years.

Focus on indigenous tech The TDB’s aim is to provide financial assistance to industrial concerns and other agencies attempting development and commercial application of indigenous technology or adapting imported technology for wide domestic application.

What the Centre would like is a total utilisation of the cess collections, which will require Parliamentary approval. “We are working out the economics of it. Industry, too, will pitch in. The idea is that the money collected in the name of innovation, should be used for innovation in its entirety,” said a top Government source.

However, there is a word of caution from those who believe that the concerns of the industry and the government are different. Would intellectual property developed at Government expense make its way into private hands without proper payback to the state?

Drawing attention to the public sector’s contribution towards innovation, Pushpa M Bhargava, founder director of the Centre for Cellular and Molecular Biology (CCMB), Hyderabad, said: “What the Government immediately needs to do is set up a high-powered group that has no vested interests. There should be clear terms of reference and an idea of the kind of returns the country will get.”

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