Funding winter for startups may end with angel tax abolition: DPIIT Secy

A system of quarterly disbursement is in place for many sectors, except for few, such as food processing, where it is not feasible, he says

The government is looking at ways to speed up the process of clearing foreign direct investment (FDI) proposals, Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Rajesh Kumar Singh said on Thursday. In a post-Budget interview, Singh told Shreya Nandi that the pipeline of funds should get better, with abolition of the contentious angel tax. Edited excerpts:

The Budget talks about simplification of FDI rules. What changes can we expect?

As of now, we are looking at process improvements. There is a standard operating procedure ((SOP) of three months to take a decision on clearing FDI proposals via the government route. These are not being adhered to in many cases, including DPIIT. At times, there are no inputs from the concerned ministries on time (that delays the process). The idea is to make decisions faster. An (existing) online portal will be used to flag the delays.

What about further liberalisation of the FDI limit in certain sectors?

No view has been taken. There are some residual sectors, including news broadcasting. However, there’s no consensus. Initial consultations have also not taken place.

How can the abolition of the angel tax help startups?

The startup ecosystem is thrilled and they feel that the funding winter will end. Venture capitalists, high net worth individuals and foreign investors — all those who were hesitant about investing in startups due to the compliance burden of having to pay the tax, will be a little more forthcoming. In that sense, the pipeline of funds should get better.

What’s the road map for Jan Vishwas 2.0 and the Business Reforms Action Plans (BRAP) announced in the Budget?

We are trying to identify as many provisions as we can. We are trying to work with other government departments to get a reasonable number (of compliance burdens) so that it’s worthwhile to make a Bill for it. For BRAP 2024, the methodology and indicated list of 280-odd questions have been shared with the states. We’ve got feedback from the states. BRAP will be out next year.

What has been the progress on the disbursement of incentives under the production-linked incentive (PLI) scheme, now that a quarterly payment system has been approved?

A system of quarterly disbursement is in place for many sectors, except for few, such as food processing, where it is not feasible. The disbursement cycle (from annual to quarterly) has been changed recently. As of May-end, (cumulative) disbursement (for PLI beneficiaries) has been about Rs 9,721 crore. Investment is over Rs 1.28 trillion, sales Rs 10.8 trillion, employment is 850,000 and exports are Rs 4 trillion. What matters is investment, sales, employment. Disbursement is back-ended and it may take more time.

There have been concerns over the performance of project management agencies (PMAs)...

Some SOPs for the PMAs have been firmed up, depending on the better performing PMAs. More importantly, the idea was to sensitise them that they are not like government departments, but their job is to sit with the beneficiaries and facilitate the disbursement cycle. I am very confident that the processing of claims will be faster.