Five months after its launch by Prime Minister Narendra Modi, the government's Startup India initiative is due for an overhaul to improve participation. The Economic Times reported that the government recently held a review after fewer-than expected startups applied for recognition and only one startup made the final cut for the incentives that are available under the programme.
Action Plan 2.0?
The Department of Industrial Policy and Promotion (DIPP) has chalked out a strategy to upgrade the action plan and get more enterprises to take part, a senior official told ET. The report also elaborated that about 200 companies had applied for recognition, of which, 30 were shortlisted for consideration last month by the inter-ministerial board formed by DIPP.
In the end, only Hyderabad-based Cygni Energy was selected while most others failed to provide the required paperwork. So in order to attract more startups, DIPP is designing a learning module to "educate the startups in areas, including incorporation of a company, business models," the the unnamed official told ET.
The government will examine all applications within a day and ask those that haven't furnished the required documentation to provide these for counselling and training. Companies that want to avail of the tax and intellectual property rights-related benefits will have to wait for the approval of the inter-ministerial board.
Free legal help and other changes
Besides this, the report noted that startups will no longer need a certificate of recognition from the government to access legal help for filing patents. The service is being provided free to startups through an empaneled group of advocates.
The industry department also plans to impose a cap on fees that can be charged by incubators for certifying a startup as an "innovative business." This has been done after several companies complained of exorbitant charges for providing recommendation letters.
DIPP is hoping that increased outreach programmes and the upcoming national startup festival in Hyderabad will draw the attention of the community to the programme.
However, startups feel the government should only focus on scrapping regulations that are an irritant for businesses trying to get off the ground, often pushing them to leave India and set up shop elsewhere. A senior executive at a think tank who did not wish to be named told ET,
Government is caught up in the role of being a beneficiary and incentive provider. It need not become a coach but a facilitator by reducing compliances.
Fund deployment and tax holidays
The Small Industries Development Bank of India (Sidbi) has approved Rs 930 crore in disbursals from the Rs 2,000 crore fund-of-funds it launched in August to support venture capital funds for startups. The startup corpus of Rs 10,000 crore announced in the Startup India Action Plan is also expected to be put to use soon.
The self-certification scheme in respect of nine labour and environment laws has also been initiated by various government departments in order to reduce the regulatory burden on startups as per the action plan.
Another area of concern for many startups has been regarding the proposed three-year tax holiday for startups, available over a five-year window put forth in the Startup India plan. The Ministry of Commerce and Industry had approached the Ministry of Finance with a proposal to expand the income tax exemption period from the current three years to a longer duration. Minister of State for Commerce and Industry Nirmala Sitharaman has hinted that the tax holiday may be extended up to seven years.