Discuss the provision for funding of R&D projects under various schemes of the Government of India. Also, critically comment upon them.

 Innovation and development is a vital driver of economic growth and stability, ushering in economic and social prosperity. New ideas and products act as catalysts for a set of new goods and services that could change the economy and increase employment. Further, businesses are better positioned to compete in the global marketplace with constant R&D investments at the proper levels.

Therefore, to get the best competitive advantage and keep the business continually growing, investment in research and development must be continuously made. In this article, we look at some of the ways of securing funding for research and development of the new product or a new process or new systems.

SIDBI Revolving Fund for Technology Innovation (SRIJAN Scheme) 

SIDBI provides financial assistance to MSMEs towards development, scaling up, demonstration and commercialization of innovative technology-based projects. The financial assistance is provided in the form of early-stage debt funding on softer terms for development, demonstration and commercialization of new innovations in emerging technological areas, un-proven technologies, new products, process, etc. which have not been successfully commercialized so far. The maximum loan amount provided is generally not more than Rs.100 lakhs per project at a concessional rate of interest of not more than 5% per annum. 

Assistance up to 80% of the total project cost is normally considered and in certain cases, higher amounts of assistance are considered based on the innovative content of the project. Costs covered under the SRIJAN Scheme include:

• Capital expenditure e.g. factory shed for the project, plants & machinery, utilities, etc.,

• Intangibles e.g. patents/ copyrights / R&D / technology transfer fee / licensing/Marketing

• Working capital margin

• Pre-operative expenses

• Manpower cost

• Contingencies / Any other heads required for the project

A maximum loan repayment period of 6 years is available including moratorium. Security to be given to the bank for the loan are the first charge on assets (both moveable/immoveable) created / to be created under the project, first / pari passu / second charge on other assets of the unit depending upon prior charge created/ to be created, personal guarantees of promoters

Know more about SIDBI SRIJAN Scheme 

Assistance from Technology Development Board

The Technology Development Board aims to accelerate the development and commercialization of indigenous technology or adapting imported technology to wider domestic application. The Board plays a pro-active role by encouraging commercial enterprises to take up technology-oriented projects and provides financial assistance in the form of Equity, Soft loans, or Grants.

The loan or equity capital provided by TDB to industrial concerns and financial assistance to research and development institutions is provided at a simple interest of 5 per cent per annum and TDB does not levy processing, administrative or commitment charges. The quantum of loan will be, normally, limited up to 50 per cent of the approved project cost. The duration of the project should not generally exceed three years.

The loan is payable in instalments that links to risk-associated milestones in accordance with the terms and conditions of the loan agreement. The refund of the loan and payment of interest commence one year after the project completion and the full loan amount is recoverable in five years thereafter. In some cases, TDB may have nominee director(s) on the Board of Directors of the assisted industrial concern. 

TDB may also subscribe by way of equity capital in an industrial concern, on its commencement, start-up and/or growth stages. The full Board of TDB decides the equity subscription. It is up to 25 per cent of the approved project cost provided such investment does not exceed the capital paid-up by the promoters. The pre-subscription conditions include that the promoters should have subscribed and fully paid up their portion of the share capital.

Grants by TDB: TDB may also provide financial assistance by way of grants and/or loans to industrial concerns and R&D institutions engaged in developing indigenous technology. TDB is not to be considered a substitute for funding by the Government or other appropriate institutions. The sanction of grants is decided by the full Board of TDB and is sanctioned in exceptional cases. Royalty may be levied in case of grant assistance.

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