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The Government’s electronic manufacturing policy, which is still in its implementation stage, has hit a bump with differences cropping between the Department of Electronics and Information Technology (DeitY) and the IT Ministry’s Investment Promotion Cell.
The Government had proposed to create an electronics development fund (EDF) of $2 billion (around ₹12,000 crore) to promote innovation, intellectual property, research and development, nano electronics and help commercialise made-in-India products, so that the country does not depend on imports.
The DeitY had proposed that the corpus be divided for various activities. For example, it wanted 25-49 per cent of the fund for seed, early and growth stage across the spectrum of activities in the electronics and technology acquisition. Similarly, it had proposed a corpus of 25 per cent for infrastructure related to electronics ecosystem development and manufacturing.
‘Adequate justification’However, the Investment Cell has written to DeitY saying that ‘adequate justification’ has not been provided to set up a venture capital fund for infrastructure related to electronic ecosystem development, which is more amenable to be developed through a mechanism of grant on loan.
Further, the process of re-cycling of funds through a suitable special purpose vehicles needs elaboration. “It is not clear as to why the financial return obtained while exiting sub-fund cannot be ploughed back to the main fund,” the letter that BusinessLine has access to said.
According to the letter, DeitY had proposed separate sub-funds for different portion of value chain such as R&D innovation, commercialisation of R&D, seed, early and growth stage fund.
Therefore, sub-funds meant for first two activities have to be necessarily funded to the extent of 100 per cent by the Government as no private participation is possible in a fund in which no return is envisaged. A 100 per cent Government-backed VC fund will not be able to leverage the strength of private sector, the letter said.
“Therefore, it is suggested that ‘sub-funds’ should not target different portion of value chain, rather separate sub-funds can be established for different types of technology (nano technologies, medical electronics, telecom, etc),” the IPC said in its letter.
Such sub-funds can invest in enterprises right from R&D stage to grown stage, it added.
The IPC also said the Department of Telecom should be included as one of the members of EDF managing board since DoT was a member of National Manufacturing Competitiveness Council and the policy of DeitY has close relation with the manufacturing of telecom equipment.
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