Catch promising projects early: panel to investors

Noting that several projects get steadier flow of funds only after they show signs of lucre in the later stages of implementation, the Planning Commission has sought a comprehensive view of investments, particularly for small-scale enterprises.

This is to ensure funding for projects in their early stage, to encourage of the promising ones among these, it was noted at the first meeting of a committee formed to suggest ways to improve investment climate in the country.

The body, which seeks to attract investment for early-stage ideas and is headed by former revenue secretary Sunil Mitra, was told to look at issues holistically, instead of confining itself to just providing concessions.

The meeting, convened recently, saw Planning Commission deputy chairman Montek Singh Ahluwalia saying the recommendations should be in compliance with the proposed direct taxes code (DTC) regime expected to be rolled out by next year. The proposed DTC is aimed reducing various kinds of tax exemptions.

The report, officials said, would specify separately for states and the Centre the do’s and don’ts to attract this kind of funding. It would also suggest the changes required in the rules to facilitate angel investors.

The recommendations would not focus on areas already covered by mutual funds and private equities.

An official said many members of the committee felt enforceability of contracts and exit options were the problems in this kind of angel investment in the country. “The creation of fast-track redressal mechanism is one key area to attract this kind of funding,” one of them told Business Standard.

Mitra, when contacted, said there was a wide gap between investment for early-stage ideas and for projects already workable. “Venture capitalists come much later than the stage of early ideas,” he noted.

The committee, Mitra said, was formed to suggest how to create an eco-system to attract this kind of funding, as there is a lot of catching up to do with advanced nations in this area of investment.

Officials said the committee’s recommendations could also form part of the final document to the 12th Five-Year Plan, in which the Planning Commission is expected to flag major issues concerning this kind of investment. The committee has been asked to give its report before April, so that its findings can be incorporated in the final plan document for implementation in the next (2012-17) FYP.