DPIIT begins working on guidelines for National Seed Fund

DPIIT Secretary Guruprasad Mohapatra says most startups face problems in raising funds in the ideation to the proof-of-concept stage, adding that the department is now working on a National Seed Fund policy and creation of the fund.

The Department for Promotion of Industry and Internal Trade (DPIIT) is working on guidelines for a National Seed Fund that was announced in the Budget for 2020-21 to help startups and budding entrepreneurs, a top government official said.

DPIIT Secretary Guruprasad Mohapatra said most startups actually face problems in raising finance or funds in the ideation to the proof-of-concept stage.

Guruprasad Mohapatra

He said now that the finance minister had announced a proposal in the Budget to provide seed fund to startups, the department would work on this .

Finance Minister Nirmala Sitharaman proposed providing early-life funding, including a seed fund, to support ideation and development of early-stage startups.

"So now we will move a Cabinet note, and create a fund and guidelines in this regard," Mohapatra said. He said the department would work on a National Seed Fund policy and creation of the fund.

In their interactions with the department, startups have time and again demanded formulation of a national seed fund scheme. Some states and central government departments like Biotechnology Industry Research Assistance Council have their own seed fund schemes, but they are small and are not pan-India, the secretary said.

The department has already held discussions with states, and central government departments that have such schemes.

ESOP boost for startups

The secretary added that the Budget announcement regarding employee stock option plans (ESOPs) would help in further strengthening the startup ecosystem in the country.

"In order to give a boost to startup ecosystem, I propose to ease the burden of taxation on the employees by deferring the tax payment by five years or till they leave the company or when they sell, whichever is earliest," the finance minister had said.

ESOP is a significant component of compensation for employees and is currently taxable.

On the Budget, Mohapatra said the need of the hour was to encourage investments and that there were a lot of positive things. "It is a pro-investment Budget," he said.

(Edited by Teja Lele Desai)


Updates from around the world