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Friday, June 12, 2015

Promoting Industrial Research: A herculean task for orphaned department- DSIR

DST has published a white paper `Simulation of Investment of Private Sector into Research and Development in India ' (2013) prepared by joint committee of industry and government. The committee addressed the very fundamental question- how much is private sector investment in R&D today. The clear answer- no one knows
Excerpts from the report:
Tax Foregone in 2012-13 for supporting private sector R&D was estimated at Rs 6335 crores.Based on this investment by private sector in R&D is computed as Rs 19,197 crores. The committee says that  these are gross estimates and would not include the direct investments of private sectors which are not covered by Section 35 (2AA) and Section 35 (2AB). R&D investments are meant for 100% write-off in the first year. Reliable estimates of investment which are actually eligible for 100% writeoff in the first year are not known. Current CAGR of tax foregone since 2 years is 16.3%. Based on CAGR it is estimated that private sector investment into R&D, eligible for being considered under Section 35 (2AA) and Section 35 (2AB) are estimated to be Rs. 40,844 Crores by 2017.

The committee flagged another important aspect-R&D risks and failure management:
Current financial audit procedures are risk averse and prohibit risky ventures. In the deployment of public funds and loans from banks especially, R&D led innovations do not receive adequate support. Inputs / Suggestions received from stakeholders 
3.7.1 Work out provisions for writing off government loans/grants for private sector R&D failures. Caps may be defined for small, medium and large firms. 
3.7.2 Institute a simple and one-window apex system in the Ministries to clear such items expeditiously. 
3.7.3 A professional expert group involving financial experts may be commissioned to study the Israel and Singapore models for adaptation to suit the national innovation eco system.  

The Billion rupee question- who is going to implement this.
As per business allocation, DSIR ( Department of Scientific and Industrial Research) is responsible for management of both CSIR and industrial research of private sector. The fiscal incentives are administered by DSIR so also minor grants for R&D.However, for historical reasons, DSIR never has a full fledged, independent Secretary, most of the years DG, CSIR also discharged responsibilities as Secretary, DSIR.
Can the orphaned department take up the herculean task of promoting industrial R&D in India on a scale compatible with Make-In-India vision? 

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