With the 2019 interim budget round the corner, stakeholders in the electronics sector are expecting the government to create a seed fund of Rs 1,000 crore and abolish the angel tax that has hit start-ups hard.
“The Government should create a seed fund of Rs 1,000 crore, which can be matched by industry and VCs (venture capitalists), to provide seed funding to build 1,000 start-ups in the ESDM (electronic system design & manufacturing) space. We have requested the government to create such a fund in the budget in our wish list submitted to the ministry,” said Rajesh Ram Mishra, president, India Electronics and Semiconductor Association (IESA), the trade body representing the ESDM industry.
“We have also recommended to the government to abolish angel tax for ESDM start-ups," Mishra added. "Angel tax and the current policy of getting the start-up valuation done by a merchant banker are hitting ESDM start-ups very hard."
According to IESA, start-ups in electronics and semiconductor space primarily depend on angel and self-funding, as very few VCs in India are investing in ESDM companies.
Additionally, the association has also urged the government to enable research and development (R&D) through provisioning separate budget to fund projects of national interest in the electronics and semiconductor domain and enable collaborative R&D among public sector undertakings, SMEs and start-ups.
With electronics becoming a key enabler in creating an ‘intelligent’ economy like smart homes, smart transportation, smart cities, the association has urged the government to provide support to create 50 intelligent electronics incubators collaborating with industry in various technology and industry verticals in mission mode similar to Atal Innovation Mission.
For scaling small and mid-size companies in ESDM space to become large MNCs like Huawei and ZTE, the stakeholders expect that government must ensure domestic market access through stricter implementation of preferential market access, global market access through linkage of Indian government grant to developing countries with export from Indian ESDM companies and reduction cost of financing for both R&D and manufacturing by half.
Stating that building secured digital infrastructure in India is critical considering the vulnerabilities arising due to geopolitical uncertainties, the industry body has urged the government to insist on “all-in India” products for strategic needs where every component used is designed and manufactured in India, a practice being followed in China today.
Despite the Modified Special Incentive Package (MSIP) of the union government, large manufacturing set up in semiconductor and electronics has still not come up.
IESA has suggested that MSIP could focus on the guaranteed market for a certain percentage of production from these large ESDM manufacturers instead of purely focusing on early subsidy, similar to BOT model that is working well in the construction of road and airports in the country.