Govt moots special zones for drug firms

In a move aimed at encouraging the growth of innovation-driven industries, the Ministry of Science and Technology has proposed to set up special innovation zones that will offer a host of fiscal incentives for research and development (R&D) companies in India.

A draft bill, National Innovation Act 2008, prepared by the ministry, focuses on increasing research investment and enacting data confidentiality clauses to make India a preferred destination for research-oriented companies in sectors like infotech, pharma and engineering.

The Indian innovation rules will be in line with similar laws enacted in countries like the US, Brazil and China, a ministry official has said.

The draft Bill, available on the ministry website for public comments, defines innovation in its broadest sense. It includes new or improved goods or services, as well as improvements in operational or managerial processes.

The key difference between the existing R&D sops offered by the government and the proposed one is that “innovation” under the draft Bill cannot purely be of academic nature but should considerably enhance “measurable economic value” like increase in market share, competitive advantage, improvement in the quality of products or services or reduction of costs.

Similarly, the proposal is to cover all clusters engaged in research in scientific, mathematical, technological or engineering services under the ‘special innovation zone’ category.

The proposed law, once enacted, will solve the issue of trade secrets or data protection, one of the biggest problems faced by innovation-driven industries like pharmaceuticals in the country. The rule will lay down preventive or mandatory injunction provisions restraining misappropriation of confidential information.

The suggested fiscal benefits for special innovation zones or innovation parks include tax holiday on profits, income-tax exemption, exemption of capital gains on transfer of assets, exemption from Customs duty and excise duty on all goods sourced.

In order to encourage the participation of angel investors in the innovation space, the ministry has also proposed income-tax sops on investments in securities made by such investors engaged in translating research and development leads into scalable technologies.

The Bill also talks about establishment, operation and management of electronic or physical market place for commercialisation of innovation.