“We believe that sustained support from the government will lead to Karnataka becoming the manufacturing hub for the high-tech ESDM manufacturing sector

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SR Patil
S.R. Patil, minister for information technology (IT), biotechnology (BT), science and technology (S&T), planning and statistics, government of Karnataka

Karnataka aims to facilitate, promote and develop the ESDM sector in the state, making it a preferred destination for investment in this sector. In a conversation with Sudeshna Das, senior executive editor, Electronics Bazaar, S.R. Patil, minister for information technology (IT), biotechnology (BT), science and technology (S&T), planning and statistics, government of Karnataka, shared his vision about developing the electronics industry into an important growth engine for the entire state.

EB: What is your vision for the ESDM industry in Karnataka?
Electronic system design and manufacturing (ESDM) is the fastest growing segment of the information and communications technology (ICT) sector. This sector is expected to grow to US$ 400 billion by the year 2020, with exports accounting for US$ 80 billion. The government of Karnataka will be aiming for at least 10 per cent of this revenue and 20 per cent of the export targets.
The vision for the ESDM industry in Karnataka is to facilitate, promote and develop this sector in the state, and make Karnataka a preferred destination for investment in ESDM —for investments in telecommunications, defence, strategic electronics, medical, industrial, automotive, consumer products, applications, as well as the components, parts and accessories required for the aforementioned products and applications.

EB: What are the unique strengths of the state with respect to attracting investors in the ESDM sector, and specifically in electronics design?
Karnataka was the first state to announce a dedicated policy for the ESDM sector in 2013. The presence of premier institutions like IISc, HAL, NAL, IIMB, IIITB and more than 400 public and private R&D institutions, the availability of a high-quality talent pool with more than 100,000 engineering graduates being added annually and access to 25,000 PhDs have played their part in making the state home to the fourth largest technology cluster and the second largest chip design hub in the world. It now also boasts of being the startup capital of India, with Bengaluru figuring among the top 20 startup ecosystems in the world.

EB: How has the state developed as a design hub for the ESDM sector of the country? What are the initiatives taken by the Karnataka government to further develop it as the manufacturing hub for this sector?
With 80 per cent of India’s chip design firms working out of the state, Karnataka is ‘the design hotspot’ of the country. This has happened over a period of time due to a mix of conducive policy initiatives of the government formulated in close collaboration with the private sector and academia. In fact, Karnataka was also the first state to announce an IT policy way back in 1997. The historical advantage of Bengaluru being the IT capital of the country, with more than 400 of the Fortune 500 companies having a base in the city, has also played an important role.
Under the Karnataka ESDM (KESDM) Policy, the emphasis is on skilling, providing infrastructure facilities in the form of common instrumentation facilities and ready-to-occupy industrial parks, access to capital for startups, and ease of setting up business to attract investments in the sector. Besides this, we are giving special incentives for Karnataka companies.
Towards this end, we have set up ESDM innovation centres and common instrumentation facilities which have all the required tools such as VLSI design tools, prototype development facilities, testing facilities, characterisation labs, compliance and certification labs along with the requisite manpower and components stocks. Such a facility is coming up in the Mysore ESDM cluster and the Electronics City cluster on a PPP basis, with support from the government of Karnataka and the Centre. Another such facility, called SMART (Semiconductor Measurement and Reliability Testing Lab), has also been commissioned in collaboration with STPI on the PPP mode.
A 200-acre greenfield cluster has also been identified near Sira, Tumkur and will be commissioned soon. We plan to develop seven such clusters across Karnataka. The state-supported Karnataka Semiconductor Venture Fund, with a corpus of ₹ 1 billion, has been in operation and several ESDM startup companies have benefited from it. We believe that sustained support from the government will lead to Karnataka becoming the manufacturing hub for the high-tech ESDM manufacturing sector.

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EB: How does the state government plan to achieve the goal stated in the Karnataka ESDM (KESDM) Policy 2013? To what extent have the various schemes been rolled out or operationalised?
In addition to steps taken to make Karnataka the manufacturing hub for high-end electronics manufacturing, the KESDM policy will also attract new investments into the state through special incentives for large, mega, super-mega and ultra-mega projects. Incentives are also being given in the form of capital grants for anchor units in new greenfield clusters. In order to drive high-end innovation in the state’s ESDM companies, Karnataka also reimburses investments in R&D and expenditure incurred during IP creation.
To overcome the large disability faced by the Indian ESDM industry against global competitors, we also have a duty drawback scheme with respect to state taxes that don’t get refunded to exporting units in the normal course of implementing the state tax laws. The policy also extends the benefit of interest-free loans to ESDM companies against the eligible dues of VAT and CST.

EB: What are the steps taken by the Karnataka government to ensure ‘ease of doing business’ in the ESDM sector?
The Department of Information Technology, Biotechnology and Science & Technology has a single window clearance mechanism to provide all statutory clearances for new investments coming into the state. A special ‘ESDM cell’ has been set up by this department to act as a single point of contact for all queries related to investment facilitation as well as the administration of incentives.

EB: What is the current level of investments in the state’s ESDM sector?
Karnataka is the fourth largest contributor to the electronics industrial output in the country with a share of 10 per cent, and the sector recorded a CAGR of 18 per cent in the period 2008-13. The major companies that have made Karnataka their home include Intel, Qualcomm, AMD, NVIDIA, Tejas Networks, Cisco and many more.

EB: How will the state foster entrepreneurship and an innovation culture in the ESDM sector through startups?
The government of Karnataka announced its startup policy on November 27, 2015, with a vision to create a world class startup ecosystem in the state through strategic investments and policy intervention, leveraging the robust innovation climate in Bengaluru. The implementation strategies include nurturing innovation in educational institutes, encouraging commercialisation of technologies through technology-business incubators, providing incubation support to budding entrepreneurs, and facilitating startups with mentorship and other business services.
In order to ensure access to capital through the entire life cycle of a startup, funding schemes are being put in place starting from the idea stage to POC funds, and on to venture funding through the Karnataka Fund of Funds. Several incentives and concessions like VAT/CST/service tax exemptions, as well as support for patent filing and for marketing spends are also being provided. We know that it is these startups that have the most potential in generating jobs for the youth while creating cutting-edge technology products within the country.

EB: What are the initiatives taken by the Karnataka government to promote skills development and enhance the ESDM sector with a special focus on MSMEs?
The state is investing heavily in the skilling of manpower in the sector and ensuring that curriculum is endorsed by the industry. The state is running a unique initiative with a plan to train 15,000 youngsters specifically for this sector, in the next four years. We have received Central government funding for this, and this plan is expected to facilitate access to a trained pool of manpower. We are also supporting engineering colleges in Tier 2 cities with student project funding and incubation support under the New Age Incubation Network Scheme. Ninety projects were supported last year with up to ₹ 300,000 funding per project, which has already resulted in two patents being filed and the development of 21 prototypes by these students. We hope that such initiatives will help in providing young minds with the necessary exposure to new technologies in the sector.

EB: What are the innovative marketing plans and platforms offered by the Karnataka government to facilitate the sector?
Karnataka has established KBITS (Karnataka Biotechnology and Information Technology Services), an organisation under the Department of Information Technology and Biotechnology, that helps in facilitating and promoting the IT and biotech sectors in the state by organising as well as participating in road shows, trade shows, conferences, symposia, and seminars held at national and international levels.
The department has also been organising its own flagship event called BangaloreITE.Biz, which is in its 18th year now. This is one of the premier events in the country, which gives an opportunity to members from the industry, academia and students to network on a single platform. The department closely works with industry associations like IESA, ELCINA, CII, NASSCOM, MAIT, CLIK, etc.
Also, under the KESDM policy, registered companies can avail financial support for international marketing, sales promotion, trade show participation, market research, etc.

EB: What is your message to the ESDM ecosystem partners?
In the current knowledge economy, it is necessary to take timely policy initiatives to equip industries in the ESDM sector. The government of Karnataka is making an effort to update the KESDM policy to include emerging electronics verticals such as nano electronics, telecommunications, and fabless and VLSI electronics services companies to keep pace with the rapidly growing ESDM ecosystem. The KESDM policy will ensure that a greater number of companies benefit from the incentives and subsidies provided by the state government to encourage the electronics industry.
Karnataka is a land of opportunities, and has been the leader in this sector. We want the ESDM ecosystem partners to participate in a big way and make the maximum use of the available technology, the KESDM policy and the skilled manpower available across the state.

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