Lok Sabha Question No. 1174 (UNSTARRED), answered on 2019-02-11
Subject: Strengthening of Startups
Ministry: COMMERCE AND INDUSTRY
Asked by: ARVIND GANPAT SAWANT, ANIRUDHAN SAMPATH

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 1174. TO BE ANSWERED ON MONDAY, THE 11 TH   FEBRUARY, 2019.

## STRENGTHENING OF STARTUPS

## 1174.  SHRI ARVIND SAWANT: DR. A. SAMPATH:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state: वाणिज्य एवं उद्योग मंत्री

- (a) whether  the  Government  proposes  to  strengthen  the  startup  ecosystem  at local level in the country;
- (b) if  so,  the  details  thereof  including  any  proactive  steps  taken/proposed  to  be taken in this regard;
- (c) whether  the  startups  in  the  country  have  seen  a  108  per  cent  growth  in funding in 2018, if so, the details thereof; and
- (d) whether  it  has  come  to  the  notice  of  the  Government  that  the  NASSCOM president  has  remarked  about  startups  not  receiving  much  support  in  India barring a few exceptions, if so, the reasons therefor?

## ANSWER

## वाणिज् य एवं उद्योग मंत्रालय में राज् यमंत्री (श्री सी.आर. चौधरी) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI C.R. CHAUDHARY)

- (a) & (b): Department for Promotion of Industry and Internal Trade (DPIIT) under Startup  India  initiative  has  taken  several  steps  to  strengthen  startup ecosystem at local level in the country. The steps taken are listed at Annexure I.
- (c): While funding of Startups in India has seen a rising trend in 2018, the data thereof is not centrally maintained.
- (d): No, Madam.

*****

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  &  (b)  OF  THE  LOK SABHA UNSTARRED QUESTION NO. 1174 FOR ANSWER ON 11.02.2019.

## Steps taken to strengthen startup ecosystem at local level in the country

## Simplification and Handholding

## 1.  Compliance Regime based on Self-Certification

-  List of 36 industries in 'white' category has been published on CPCB's website.  CPCB  has  exempted  such  industries  from  all  the  applicable self-certifications under 3 Environment related Acts listed in the Startup India Action Plan
-  Ministry of Skill Development and Entrepreneurship (MSDE) has issued advisory  to  states  to  allow  Startups  to  self-certify  compliance  with  the Apprenticeship Rules, 1992 of Apprenticeship Act, 1961
-  Startups  have  been  allowed  to  self-certify  compliance  in  respect  of  6 Labour  laws;  27  states  have  confirmed  compliance  to  the  advisory issued on 12.01.2016 and new advisory issued on 6.4.2017 by Ministry of Labour and Employment (MoLE)

## 2.  Rolling out of Mobile App and Portal

-  Startup  India  portal  has  been  developed  to  provide  access  to  the following:
- o Startup  recognition  -  15,798  Startups  have  been  recognised  till  7 th February 2019
- o Learning & development  module  -  over  2,30,000 registrations achieved
-  The  portal  acts  as  a  one  stop  solution  for  all  queries  related  to  the Startup India initiative
-  Startup  India  mobile  app  has  been  developed  to  provide  on  the  go services and information to users.

## 3.  Startup India Hub

-  1,23,000+ queries have been handled by the Startup India Hub
-  660+ Startups have been mentored for incubation and funding support
-  2,90,000+ registrations have been achieved on the Hub as of February, 2019.

## 4.  Legal Support and Fast-tracking Patent Examination at Lower Costs

-  427 facilitators for Patent and Design and 670 facilitators for Trademark

applications have been empanelled to assist Startups in filing of patents and trademarks

-  801 applications have received rebate of up to 80% on patent fees and have also received legal assistance
-  Patent  filing  has  been  made  faster  for  Startups  and  accordingly  176 Startups have been facilitated
-  Trademark  facilitation  has  been  extended  to  1226  Startups  as  of October, 2018

## 5.  Relaxed Norms of Public Procurement for Startups

-  Relaxed  norms  for  public  procurement  for  micro,  small  and  other enterprises  have  been  provisioned  in  the  Procurement  Policy  by  the Ministry of Micro, Small and Medium Enterprise
-  All  Central  Ministries /  Departments /Department of Public Enterprises/ Central  Public  Sector  Undertakings  have  been  authorised  to  relax conditions of prior experience and prior turnover with respect to MSEs in all public procurements subject to meeting quality and technical specifications
-  Further, Rule 173(i) has been incorporated in GFR, 2017 which provides for  relaxation  of  conditions  of  prior  turnover  and  prior  experience  for Startups,  and
-  Rule 170(i) of GFR 2017 has been amended on 25th July 2017 allowing all  Startups  as  recognized  by  DIPP  exemption  from  submission  of Earnest Money Deposit/Bid Security in public procurement tenders

## 6.  Faster Exit for Startups

-  Insolvency and Bankruptcy Board has been constituted
-  MCA  has  notified  the  relevant  sections  55  to  58  of  Insolvency  and Bankruptcy  Code,  2016  pertaining  to the  Fast  Track  process  on 16.6.2017 and also notified that the process shall apply to Startup (other than the partnership firm) as defined by DIPP. For Startups, Insolvency Resolution process to be completed within 90 days as against 180 days for other entities.

## Funding Support and Incentives

## 7.  Providing Funding Support through Fund of Funds (FFS) with a Corpus of Rs. 10,000 crore

-  Fund of Funds for Startups of Rs. 10,000 crore shall be released over two Finance Commission cycles, that is, by the year 2025
-  Rs. 500 crore has been released to SIDBI in FY16 and Rs. 100 crore in FY 17
-  Total  commitments under  FFS  stand at  Rs.  1,750.70  Cr.  crore  to  35

Alternative  Investment  Funds  (AIFs)  while  drawdown  by  AIFs  is  Rs. 279.98 crore

-  182 Startups have received funding under FFS with catalysed investment of Rs. 1004.82 crore

## 8.  Tax Exemption on Capital Gains

-  Section 54 EE has been introduced under the Finance Act, 2016 which provides  for  exemption  of  capital  gain  arising  out  of  transfer  of  long term  capital  asset  (not  exceeding  Rs.  50  lakh  in    a  financial  year) invested in a fund notified by Central Government
-  Section 54 GB of Income-tax Act, 1961 has been amended to provide exemption from  tax  on  capital  gains  arising  out  of  sale  of  residential house or a residential plot of land if the amount of net consideration is invested in equity shares of an eligible Startup for utilizing the same to purchase specified asset.

## 9.  Tax Exemption to Startups for 3 Years

-  Provision has been made for Startups (Companies and LLPs) to avail income  tax  exemption  for  3  years  in  a  block  of  7  years,  if  they  are incorporated between 1 st April 2016 and 31 st March 2019.
-  94  Startups  have  been  approved  for  availing  tax  benefits  as  of February 2019

## 10.  Tax Exemption on Investments above Fair Market Value

##  Removal of Angel Tax

Tax  exemption  on  investment  above  Fair  Market  Value  has  been introduced on 14th June 2016. Also, on 11th April 2018, DIPP modified the  process  of  recognition  and  tax  exemptions.  Eligible  Startups  are now allowed to apply for exemptions under Section 56 (2) (viib) through Startup India portal. Further, Revised norms for Angel Tax exemption under  section  56  of  Income  Act  have  been  notified  on  16 th January 2019.

## Industry-Academia Partnership and Incubation

## 11.  Launch of Atal Innovation Mission (AIM)

-  5441 schools selected for establishing tinkering labs and Rs. 12 Lakh each has been disbursed to 2071 tinkering labs.

## 12. Harnessing Private Sector Expertise for Incubator Setup

-  8 existing Incubators have been sanctioned a total scale-up grant of Rs. 34 crore by NITI Aayog
-  22 New Incubators approved and provided funding support of Rs. 54 crore by NITI Aayog

## 13.  Building Incubation Centres at National Institutes

-  11  TBIs  (Technology  Business  Incubators)  have  been  approved  and Rs.  42  crore  have  been  sanctioned  and  Rs.  18.7  crore  disbursed  to TBIs

## 14.  Setting  up  of  7  New  Research  Parks  modelled  on  the  Research  Park Setup at IIT Madras

-  IIT Kharagpur at a cost of Rs. 100 crore is under construction and Rs. 74.83 Cr. released to IIT Kharagpur
-  IIT Mumbai at a cost of Rs. 100 crore is under construction and Rs. 34 Cr. released to IIT Bombay
-  The Research Park at IIT Gandhinagar has been sanctioned by DST at a total cost of Rs. 90 crore and the Department has already disbursed instalment of Rs. 40 crore
-  5  more  Research  Parks  at  IIT  Kanpur,  IIT  Delhi,  IIT  Guwahati,  IIT Hyderabad and IISc to be supported by MHRD approved with a budget of Rs. 375 Crore for a period of 3 years.

## 15.  Promoting Startups in the Biotechnology Sectors

-  Department of Biotechnology (DBT) has launched Biotech Equity fund and  seed  fund  to  support  bio-incubator.  The  initiative  has  already helped 11 Bio-incubators that have been selected as recipients of the above mentioned seed fund. Also, Rs. 82 crore has been sanctioned under equity fund.
-  31  bio-incubators  have  been  supported  through  funding  support  with Rs. 142 crore sanctioned and Rs. 73.87 crore disbursed since January, 2016. The impact has been multi-fold as a total of 300 start-ups have received benefits from these bio-incubators under various programmes like  Biotechnology  Ignition  Grant,  IIPME,  Sparsh,  Grand  Challenges, BioNEST, etc.
-  In respect of Bengaluru-Boston Biotech Gateway to India: 4 entrepreneurs have joined Harvard University, USA to share ideas and receive mentorship

## 16.  Launching of Innovation Focused Programs for Students

- (a) Innovation Core program with an outreach to 10 lakh innovations from 5 lakh schools
-  4  regional  workshops  organized  &  revamped  MANAK  (Million  Minds Augmenting National Aspiration and Knowledge) approved
-  Over  1  lakh  INSPIRE  (Innovation  in  Science  Pursuit  for  Inspired Research ) Awardees competed at District & State Level
-  588 were selected to participate in the 6th National Level Exhibition and

-  Top 60 projects were showcased at the Annual Festival of Innovations in RashtrapatiBhavan from 4th-10th March 2017
- (b) NIDHI  (National  Initiative  for  Developing  and  Harnessing  Innovation)Grand challenge program
-  19 new TBIs established
-  9 TBIs supported for Seed Support System (SSS)
-  10  NIDHI-PRAYAS  (Promoting  and  Accelerating  Young  and  Aspiring technology entrepreneurs) and 10 NIDHI-EIR (Entrepreneurs-inResidence) sanctioned
-  6  new  centres  of  excellence  (COEs)  have  been  recommended  to receive funds for COEs in FY2017-18

## (c) UchhattarAvishkarYojana (UAY)

-  Rs. 475 crore for 2016-18 has been earmarked for 3 years
-  Rs. 75 crore has been disbursed for research proposals from IITs under 6 domains
-  92 projects have been recommended for approval

## 17.  Other incentives :

-  External Commercial Borrowing (ECB) guidelines for Startups: Startups can borrow up to $3 million or equivalent  per financial  year,  either  in rupees, or any convertible foreign currency or a combination of both, for a minimum average maturity period of three years
-  Foreign venture capital  investors  (FVCI)  are  now  allowed  to  invest  in Startups  irrespective  of  any  sector  without  Reserve  Bank  of  India's approval
-  SEBI (Foreign Portfolio Investors) Regulations, 2014 have  been amended to permit FPIs to invest in unlisted Non-Convertible debentures and securitised debt instruments
-  The SEBI Board has approved five key amendments  to SEBI (Alternative Investment Funds) Regulations, 2012 with respect to 'Angel Funds':
- o The upper limit for number of angel investors in a scheme has been increased from forty nine to two hundred
- o Angel Funds will be allowed to invest in start-ups incorporated within five years, which was earlier 3 years.
- o The requirement of minimum investment amount by an Angel Fund
- in  any  venture  capital  undertaking  has  been  reduced  from  Rs.  50 lakh to Rs. 25 lakh.
- o The lock-in requirements of investment made by Angel Funds in a venture capital undertaking has been reduced from three years to one year.
- o Angel  Funds  are  allowed  to  invest  in  overseas  venture  capital undertakings upto 25% of their investible  corpus  in  line  with  other AIFs.

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