The Indian electronics industry continues to grow with rapid advances in technology. There has been an emergence of a new class of tech savvy entrepreneurs who are contributing to the economic development of the nation and also generating employment opportunities for others. The new product lines or sectors that are emerging are primarily in the field of information technology, electronics, communications, auto components, etc. However, in the globalised economy where competition is tight, the competitiveness of startup enterprises gets adversely impacted in the absence of the right funding or technology upgradation.
By Himanshu Yadav
Sunday, August 28, 2011: In order to run these enterprises, venture capital support is required for successful implementation of business processes. There are various support mechanisms offered by the Indian government with facilitation services in areas such as financing, technology development and skill upgradation.
However, it is important for enterprises to effectively leverage these for their business requirements.
Various government schemes
Different businesses have different needs and to address these, various financing schemes have been established by government departments such as Department of Science and Technology (DST), Department of Scientific and Industrial Research (DSIR), Ministry of Micro, Small, Medium Enterprises (MoMSME), Ministry of Communication and Information Technology (MIT), Ministry of New and Renewable Energy, Small Industries Development Bank of India (SIDBI), National Research Development Corporation (NRDC) and Council of Scientific and Industrial Research (CSIR). Besides these, there are public and private sector banks like Axis Bank, ICICI and the State Bank of India, which have introduced venture funds for entrepreneurs, private equity groups, venture capital firms, etc.
Credit, marketing and technology are the three critical areas that any enterprise requires to make a success of its business venture. The National Small Industries Corporation Ltd (NSIC) provides credit, technology and marketing support through its 110 offices, including eight technical service centres. It also offers performance and credit rating schemes, marketing assistance schemes and bank tieups for credit facilitation. Under its SME growth fund, SIDBI offers grants ranging from Rs 20 million to Rs 250 million to small and medium enterprises (SMEs), wherein equity investment is offered in a wide range of growth sectors, such as light engineering, information technology, infrastructure related services, logistics and distribution, etc.
To source and implement the latest technology for effective business operations, DSIR and International Technology Transfer Programme (ITTP) offer loans up to Rs 10 million to projects, entrepreneurs, industries and institutions that promote international technology transfer.
MoMSME, under its credit linked capital subsidy scheme (CLCSS), offers loans of up to Rs 10 million and an upfront capital subsidy up to 15 per cent of what’s required for technology upgradation, to small scale industries (SSI). SIDBI, under its direct finance scheme, offers loans of up to Rs 100,000 to entrepreneurs or SMEs for various activities such as technology upgradation, infrastructure development, etc. The MIT under its programme to support international patent protection in electronics and IT (SIP-EIT), provides 50 per cent or up to Rs 1,500,000, for the filing of patents.
An effective marketing strategy is important for any business to grow. It is, therefore, essential for enterprises to gain national and international exposure to expand their businesses’ reach. This aspect is being backed by MoMSME, which offers marketing assistance up to Rs 500,000, wherein support to attend domestic and international exhibitions is offered. Also, grants up to Rs 125,000 are provided for air fare and space rental charges, to take part in international trade fairs and exhibitions.
Though there are various schemes offered by the government, these are either non-functional or their benefits are not reaching those they are intended for. It depends on both the government and industry to successfully implement and utilise these schemes. However, due to long procedures, companies prefer not to avail government schemes and funds.
V K Haridas, technical manager, Cedicom Electronics, a manufacturer of capacitors, says, “Though the government offers many grants and credit schemes, to avail benefit, one has to go through long procedures. It takes around one month to get one signatory document. However, there are many banks like Canara Bank and HDFC, which offer credit facilities to SSI units within a much shorter time, hence we prefer going to them. Though the interest rates are high, the procedure is fast and hassle free.”
However, Girish Nangia, managing director, Stead Electronics Pvt Ltd, says, “If the government provides any facility that helps me save costs, I would prefer to opt for it, and if the government introduces something for the advantage of the industry, then companies should take the benefit.”
While a few do know about the government schemes and funds, many shy away from them due to the tedious process one needs to go through. Hence, the government should make a sustained effort not only to market these schemes well but also to make the procedures hassle free.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine