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VOL. VII NO. 4 APRIL-JUNE 2005
* Shri Ashwani Gupta is Scientist-F and Dr. P.K. Dutta is Scientist-D inDepartment of Scientific and Industrial Research, Ministry of Scienceand Technology, Government of India. Article based on Paper
presented in the Asia-Pacific Forum on National Innovation Systems(NIS) for High-Level Policy Makers: April 28-29, 2005, New Delhi.
1. INTRODUCTION
INNOVATION has been one of the key determinantsof competitiveness in global firms. This term refersnot only to new scientific and technological inventions,
but also to system changes and the manner of doingbusiness. Firms that are able to use innovation to
differentiate their products and services outperform
their competitors, whether this is measured in terms
of market share, profitability, growth, or market
capitalization. However, quite often innovative and new
technologies fail to translate into products and services,
making the process of management of innovations
challenging.
In an endeavour to enable firms to come out with
more and more innovative products and improve the return
on investments in innovation and enhance national sharein global high technology exports, more and more countries
are realizing the need for establishment of formal National
Innovation Systems.
2. INNOVATION SYSTEM
2.1 Indian Innovation System and Its Performance
A typical technological innovation system consists
of three broad segments which enables the journey of
an idea from human mind to market. The first phase
is called the Birth Phase, where commercially viableidea gets converted into a workable prototype/process.
The next phase is called the Survival Phase wherein
up-scaling of the prototype to the pilot plant/pre-
commercial stage is done. The third phase is called the
Growth Phase wherein the pilot production is up-
scaled to commercial production. A model of the Indian
Innovation System is illustrated in Figure 1. A
description of various mechanisms of Indian Innovation
System and their performance follows.
MECHANISMSSUPPORTINGTRANSFORMATION
OFIDEATOPROTOTYPE
2.1.1 Technopreneur Promotion Programme (TePP)
As a golden jubilee initiative during 1998-99, Ministry
of Science & Technology, Government of India launched
a novel programme known as Technopreneur Promotion
Programme (TePP) to tap the vast innovative potential of
Indian citizens. The programme is jointly operated by the
Department of Scientific and Industrial Research (DSIR)and Technology Information, Forecasting & Assessment
Council (TIFAC) of Department of Science & Technology
(DST). The programme aims to support individual
innovators, from informal knowledge system as well as
from formal knowledge system so as to enable them to
become technology-based entrepreneurs (technopreneurs).
TePP provides financial support to individual innovators
to convert an original idea/invention/know-how into a
working prototype/process. Under the programme, any
Indian citizen, viz. artisan, technician, engineer, architect,
doctor, scientist, housewife, student, farmer, etc. havinginnovative idea could aspire to become technology based
entrepreneur (technopreneur). The proposal can be made,
either by an individual on his own or jointly with
sponsoring/collaborating organization involved in
technology development and promotion. The proposals
from the owner of start-ups are also considered for TePP
support, if the annual turnover of the company doesnt
exceed Rs 3.0 million.
INDIAN INNOVATION SYSTEM
Perspective and Challenges
Ashwani Gupta and P.K. Dutta*
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TECHNOLOGY EXPOR2
EDITORIAL BOARD
Rajiv Yadav
India Trade Promotion Organisation
Ashwani Gupta
Department of Scientific & IndustrialResearch
Nirupama Rao
Ministry of External Affairs
S.R. Rao
EXIM Bank
Dr. K.V. Swaminathan
Waterfalls Institute of Technology Transfer
ADVISORY & TECHNICAL
SUPPORT
Dr. S.P. Agarwal
G.P. Gandhi
Madanlal
EDITORAnil K. Kanungo
ISSN 0972-1460
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During last six years of its operation, the programme has been able to fulfill
the dreams of many innovative Indian citizens in their pursuit of becoming
technopreneurs. Since its inception, the Government of India under TePP
programme has given financial support to over 115 projects. Out of these, around
50 projects have been completed and around 25 projects have been
commercialized. The scheme has resulted in grant of domestic patents to more
than 10 innovators and US patent to 3 innovators, besides commercialization of
the processes/gadgets. Some of the successfully completed/commercialized
projects under TePP are tiltable bullock cart, innovative cotton stripper machine
(US patented), small 10 H.P. tractor, small sprayer (5 ltr. capacity), design cutting
machine, solid bio-mass fired furnace, alkali lignin from dry pine needles, diagonal
inverter for operation microscope, protein dialysis device (US patented), on-line
time domain moisture measurement, neem oil for non-healing wounds, novel
process for manufacturing heterocyclic chemicals, bus heating system, DC
MCBs, manufacturing of grape flakes, etc.
2.1.2 National Innovation Foundation (NIF)
The Government of India started National Innovation Foundation (NIF)in March, 2000 by providing a corpus fund of Rs 200 million. NIF is an
autonomous body under the Department of Science and Technology,
Government of India. Its Chairman is Secretary, Department of Scientific
& Industrial Research (DSIR). NIF has its headquarters located at
Ahmedabad (India). NIF is developing a National Register of Green
Grassroots Technological Innovations and Traditional Knowledge. It also
seeks to develop a new model of poverty alleviation and employment
generation by helping convert grassroots innovations into enterprises.
2.1.3 NGO Mechanisms
Some of the mechanisms for nurturing innovations are: Society for Research and Initiatives for Sustainable Technologies and
Institutions (SRISTI), Ahmedabad
Gujarat Grassroots Innovations Augmentation Network (GIAN), Ahmedabad
Sustainable-Agriculture & Environmental Voluntary Action (SEVA)
Rural Innovations Network (RIN)
MECHANISMSSUPPORTINGTRANSFORMATIONOFPROTOTYPETOPILOTPLANT
2.1.4 Technology Development and Demonstration Programme
(erstwhile PATSER)
The Technology Development and Demonstration Programme (TDDP) ofDSIR aims at catalyzing and supporting activities relating to technology absorption,
adaptation and demonstration including capital goods development by involving
industry and R&D organizations.
Under the programme, innovative technologies are up-scaled from the proof
of concept stage to pilot plant/pre-commercial stage by the industry. The
projects involve research, design, development and engineering and are executed
by industry, overseen by experts from university/laboratory.
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DSIR has supported over 150 projects so far since
inception of the scheme in 1992, when it was called
PATSER. More than 65 projects have been completed and
31 companies have started paying lump sum premia/
royalty. So far, more than Rs. 35 million royalty/premia
have been received. About 15 patents have been filed
based on projects supported under the scheme. Some ofthe successfully completed projects are: Development of
Process for Manufacture of Pyrazinamide, Development
of Novel Resins for Use in Solid Phase Organic Synthesis
and Combinatorial Chemistry, Development of Hand Held
Optical Test Equipment, Innovative Microelectronic
Packaging Technology, Integrated Pilot Demonstration
Plant for Spice Processing, Automatic Brick Making
Machine, etc.
2.1.5 Home Grown Technology Programme (HGTP)
The Home Grown Technology Programme (HGTP),
a mechanism of Technology Information Forecasting andAssessment Council (TIFAC) of the Department of Science
& Technology, Government of India was started in 1993
following a suggestion from the Planning Commission.
The HGTP was started primarily to support the Indian
industry for achieving competitive strength through
Dependence onSupport Mechanisms Required
Institutional Funding
1. NIF Scouting of Ideas TePPand Awards
2. NGOs: GIAN, SEVA, SRISTI, RIN
3. CIIE
4. Young Inventors Initiative(Steer the Big Idea)
IDEA/INNOVATION
BIRTH PHASE SURVIVAL PHASE GROWTH PHASE
Dependence on SupportMechanisms Optional
Idea Proof of ConceptPrototype/ WorkingModel
Pilot Plant Stage/Pre-Commercial Trials/Validation
Commercial Product/Process
IDEA SOURCE
Formal :
1. Public / Private fundedUniversities/ Institutes
2. Public/ Private fundedR&D Laboratories/Establishments
3. In-house R&D Centresof Industry
4. SIROs
5. Start-up Companies
Support Mechanisms Funding Support Mechanisms
Funding Institutional
1. TDDP (Erstwhile
PATSER)2. HGTP3. PRDSF4. Venture Capital Funding
* SIDBI* ICICI- SPREAD
1. TDB2. NMITLI3. PRDSF
4. Venture Capital Funding* SIDBI* ICICI- SPREAD
1. STEPs
DST2. TBIs
Idea
Informal:
1. Individual: Students, Teachers, Artisans, Farmers, etc.
2. NGOs
3. Unrecognized Industries
SIROs - Scientific and Industrial Research Organisations
NGOs - Non-Governmental Organisat ions
TePP - Technopreneur Promot ion Programme
NIF - National Innovation Foundation
GIAN - Grassroots Innovators Augmentation Network
SRISTI - Society for Research Initiatives forSustainable Technologies and Institution
SEVA - Sustainable Agricultural & EnvironmentalVoluntary Action
RIN - Rural Innovators Network
CIIE - Centre for Innovation, Incubat ion andEntrepreneurship
NMITLI - New Millennium Indian Technology LeadershipInitiative
TDDP - Technology Development and DemonstrationProgramme
HGTP - Home Grown Technology Programme
SIDBI - Small Industries Development Board of India
STEPs - Science & Technology Enterpreneurship Parks
TBIs - Technology Business Incubators
PRDSF - Pharmaceutical Research and DevelopmentSupport Fund
FIGURE 1 : INDIAN INNOVATION SYSTEM MODEL
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technological innovation. HGTP assists industries/
companies for scaling up laboratory/bench scale
technology to pilot or pre-commercial stage. The HGTP
is intended for bringing about significant improvement
in an existing product or process. HGTP is designed to
support commercialization of technologies developed
by indige nous re se ar ch an d deve lopment . HG TP
provides soft loan (generally not exceeding 50% of the
project cost) for technology development which is
repayable in user friendly instalments after the
completion of the project. More than 60 projects have
been supported so far.
2.1.6 Venture Capital Funding Mechanisms
Venture Funds are recognized globally as the most
suitable form of providing risk capital for the growth of
innovative and high technology businesses. Venture capital
is an important source of equity for start-up companies.
Professionally managed venture capital firms generally are
private partnerships or closely-held corporations funded
by private and public pension funds, endowment funds,
foundations, corporation, wealthy individuals, foreign
investors and the venture capitalists themselves.
Traditionally, venture capital in India was an extension
of the developmental financial institutions like IDBI, ICICI,
SIDBI and State Finance Corporations (SFCs). The first
origins of modern Venture Capital in India can be traced to
the setting up of a Technology Development Fund (TDF)in the year 1987-88, through the levy of a cess on all
technology import payments. TDF was meant to provide
financial assistance to innovative and high-risk technological
programmes. In 1988, Technical Development and
Information Corporation of India (TDICI) (now ICICI
Venture) and Gujarat Venture Fund Limited (GVFL) were
formed. ICICI bought out UTIs stake in 1988 and ICICI
Venture became subsidiary of ICICI.
The Indian Venture Capital Association (IVCA) was
set up in 1992, the nodal centre for all venture activity in
the country. SIDBI constituted a Venture Capital Fund(VCF) in 1992, with an initial corpus of Rs 100 million.
The fund is being utilized for venture capital assistance to
SSI units directly as well as for subscription to the corpus
of Venture Capital Funds (VCFs) for onward lending to
SSI units. This fund is now being managed by SIDBI
Venture Capital Ltd. (SVCL), a wholly owned subsidiary
of SIBDI. SIDBI is also subscribing to the corpus of other
Venture Capital Funds.
A Rs 1,000 million National Venture Capital Fund for
Software and IT Industry (NFSIT) has been set up by
SIDBI during 1999-2000.
Keeping this in view, that innovative SME units are
expected to play a catalytic role in the post-liberalized
economic environment in the country, Small IndustriesDevelopment Bank of India launched a new venture capital
fund (SME Growth Fund) dedicated to SME sector in the
year 2004 with a large corpus of Rs 5,000 million. The
fund is valid for eight years and its objective is to meet the
long-term risk capital requirement of innovative and
technology oriented units in this sector. The fund will
identify unlisted SME entities in various growing sectors
such as life sciences, retailing, light engineering, food
processing, information technology, infrastructure related
to services such as health care, logistics and distribution,
etc. The management of Fund has been entrusted to SIDBI
Venture Capital Ltd. (SVCL), a wholly owned subsidiary
of SIDBI, set up in 1999.
ICICI Venture has become the countrys first
homegrown private equity investor to touch the $1 billion
mark in terms of total funds under management. ICICI
also has Technology Support and Services Programme
(TSSP) which has programmes for promotion of
collaborative R&D projects like Sponsored Research &
Development (SPREAD) programme and Technology
Institutions (TI) programme.
2.1.7 Science & Technology Entrepreneurship Parks
(STEPs)
Science Parks help in creating an atmosphere for
innovation and entrepreneurship, and promote active
interaction between academic institutions and industries
for sharing ideas, knowledge, experience and facilities for
the development of new technologies and their rapid
transfer to the end user.
The major objectives of STEPs are to forge linkages
among academic and R&D institutions and industry, to
promote entrepreneurship among Science and Technologypersons, to provide R&D support to the small-scale industry
and to promote innovation based enterprises.
The Science & Technology Entrepreneurship Park
(STEP) programme was initiated during 1984 by
Department of Science & Technology, Government of
India jointly with all India financial institutions (IDBI,
IFCI & ICICI), State Governments and the academic
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institutions. Under this initiative, DST has catalyzed
setting up of 15 such STEPs in different parts of the
country.
2.1.8 Technology Business Incubators (TBIs)
Department of Science & Technology (DST),
Government of India initiated this scheme during 2000-2001. Under the scheme, grants-in-aid is provided by the
Department, both on capital and recurring for a stipulated
period. Presently, TBIs are being implemented at 12
locations in various academic institutes.
MECHANISMSSUPPORTINGTRANSFORMATIONOFPILOT
PLANTTOCOMMERCIALPRODUCT
2.1.9 Technology Development Board (TDB)
Technology Development Board (TDB) was set up by
Government of India on 1st September 1996 and theoperation of fund was assigned to Department of Science
& Technology, Government of India. The Board provides
financial assistance in the form of equity, soft loans or
grants. TDBs participation in a project generally does
not exceed 50 per cent of the project cost. The projects
funded by the Board include sectors such as medicine and
health, engineering, chemicals, agriculture and transport.
Till 31st March 2005, the TDB had handled 141 projects
valued at a total cost of Rs 20,438.9 million. Of the TDBs
commitment of Rs 6,629.4 million towards these projects,
it has already released Rs 5,264.1 million.
2.1.10 Drug Development Programme and Pharma-
ceuticals Research and Development Support
Fund (PRDSF)
The Department of Science and Technology (DST)
launched a Drug Development Programme during 1994-
95 for promoting collaborative R&D in drugs &
ph armaceu ti ca ls sector invo lv ing indu st ri es and
institutions. Fifty projects have been supported under the
Programme involving 22 institutions and R&D
establishments and 23 industries. These projects were aboutdevelopment of new chemical entities, new vaccines, assay
systems, drug delivery systems and herbal drugs. These
projects have resulted in filing of 4 product patents and 12
process patents. The Programme has also led to setting
up of eight National Facilities for R&D.
The Government established a Pharmaceuticals
Research and Development Support Fund (PRDSF) of
Rs. 1,500 million (US$35 million) in January 2004. The
fund will be used for supporting Pharma R&D projects
by extending soft loan with 3 per cent p.a. interest rate.
2.1.11 New Millennium India Technology Leadership
Initiative (NMITLI)
The Government of India has recognized the power
of innovation and had launched a new initiative during
2000 to enable Indian industry to attain a global leadership
posi tion in a few selected niche areas by leveraging
innovation-centric scientific and technological develop-
ments in different disciplines.
In a very short span, NMITLI has crafted more than
25 path setting technology projects involving over 50
industry partners and 150 R&D institutions with an
estimated outlay of Rs.1,600 million. These projects are
setting new global technological paradigms in the areassuch as nano material catalysts, industrial chemicals, gene-
based new targets for advanced drug delivery systems,
bio- techno logy, bio- in fo rmat ics, low co st offi ce
computers, improved liquid crystal devices and so on.
The scheme is being implemented by Council of Scientific
& Industrial Research (CSIR).
3. BARRIERS AND CHALLENGES FACED
IN ADMINISTRATION OF
INNOVATION MECHANISMS
IDEATOPROTOTYPEPHASE
(i) Lack of Proper System for Screening
and Evaluation of Ideas
(ii) Not Enough Support Mechanisms/Programmes to
Nurture Innovative Ideas to Prototype Stage
PROTOTYPETOPILOTPLANTPHASE
(iii) Lack of Awareness about Funding Mechanisms
(iv) Low User Friendliness of Funding Mechanisms
PILOTPLANTTOCOMMERCIALPHASE
(v) Complex and Expensive IPR Protection System
(vi) Disputes Regarding Ownership of Intellectual
Property Generated
(vii) Lack of Adequate Market Information for
Innovative Products
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(viii) Lack of Synergy between Various Departments
and Agencies
(ix) Non-availability of Technical Expertise and
Testing & Trial Facilities at Affordable Rates
(x) No Organized System to Allow Sequential
Conversion of Projects from Idea to Prototype to
Commercial Stage
4. SUGGESTIONS TO MEET THE
CHALLENGES AND STRENGTHEN
THE INNOVATION SYSTEM IN INDIA
Probable suggestions to overcome the challenges faced
and strengthen the Indian Innovation System are given
below.
(i) Creation of Expert Panels and a Database on
Innovations
Constitution of subject-wise expert panels in
technical institutions around the country can facilitate
screening and evaluation of ideas. Evaluation reports
from these panels in a standard format could then be
processed further for support. Creation of a Database
on Innovations which is made accessible to the
prospective innovators as wel l as the expert panels
would not only avoid processing of new applications
on ideas already considered in the past but would alsolead to cross-fertilization of ideas. Such a database
would also serve as a tool to the expert panel in proper
screening and evaluation of ideas.
(ii) Strengthening and Proliferation of
TePP-like Initatives
S&T departments of State Governments could be
encouraged and supported to evolve and operate TePP-
like initiatives in their respective states. Operational aspects
of TePP initiative, e.g. screening of applications and project
monitoring could be outsourced to universities, technicalinstitutes, NGOs, etc. for speedy implementation.
(iii) Innovation Awareness Campaign
To make people aware about various funding
mechanisms, awareness campaigns could be launched
by holding seminars/exhibitions of successful
innovators and screening of videos/CDs/documentary
films on innovative projects at technical institutes/
colleges/schools and industrial clusters in different parts
of the country. Also, sensitization camps for innovation
awareness, targeted at executives and professionals
could be organized. A standard innovation awareness
creation module could be evolved at the central level,
which could be utilized by institutions and NGOs in
the country.
(iv) User-Friendly Funding Mechanisms
The assessment and processing time of proposals in
any funding mechanism could be made optimum by
evolving well defined parameters in consultation with
experts as well as user groups. Terms and conditions of
funding could be such that support is liberal and on easy
terms, when the risk involved is high, i.e. during the birth
and survival phase of innovation and support is partial
with appropriate sharing by innovator when risk is
relatively less, i.e. during the growth phase of innovation.
Also, terms and conditions could be flexible for projects
in high priority areas. Further, the adopted mechanisms
should conform to internationally accepted benchmarks
and best practices, e.g. the Innovation Evaluation Process
(IEP) Model followed by National Science Foundation,
USA.
(v) IPR Infrastructure and Training
In order to make the filing of patents simple and easier,efforts should be made for setting up more and more
extension centres of Patent Offices around the country,
e.g. in industry associations and providing linkages amongst
them. More and more IPR awareness-cum-training
programmes should be organized to mitigate the myths
about patents, designs, trademarks and copyrights in the
minds of people and also train them in drafting patent
claims, filing patent applications, etc. Training is also
essential in drafting MoUs/Agreements to avoid IPR related
disputes at a later stage.
(vi) Marketing Support System
Providing a platform to the innovators in national and
international exhibitions to exhibit their developments would
help in attracting investors for commercialization of
innovative products/processes. Internet portals of
government departments and industry associations can
also play a useful role in providing publicity to the innovative
products/processes.
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(vii) Coordination through NIF
National Innovation Foundation (NIF) in the country
should play the role of a coordinating body between various
departments/agencies operating innovation support
mechanisms. NIF should maintain a record of all completed
projects, whether they result into prototype, pilot plant orcommercial product and then forward them to other
relevant agencies for taking them further in the innovation
chain. NIF should also maintain a panel of technical experts
and testing laboratories at approved rates, whose facilities
could be utilized by innovators/organizations.
5. CONCLUSION
The Indian Innovation System can be viewed as a
system that is presently going through an evolution phase.
Indian innovation system is continuously adapting itself to
the newer ways of conducting R&D and funding the same.
It is keen to adopt select features of innovation systems in
other countries to improve its effectiveness. In this era of
globalization, Indian Innovation System would be keen to
participate in a global innovation system, wherein idea is
generated in one part of the world, prototype is developed
in another and it is commercialized in yet another part of
the world for global consumption.
There is an increased thrust on public-private
partnership models to nurture and support the entire
innovation chain in the country. Government is continuously
enhancing the S&T outlays over the five-year plan periods
and is allocating higher funds for supporting cutting-edge
R&D and innovative projects. For example, the Union Budget
2005 announced enhancement of corpus for Pharmaceuticals
Research and Development Support Fund. NGOs in tandem
with government are turning enthusiastic to trigger an
innovation movement in the country so as to enhance the
share of innovative products in countrys production and
exports and thereby help the country to attain a competitive
world ranking. Foreign venture capital institutions and angel
investors, e.g. Warburg Pincus, Temasek Holdings and
General Atlantic Partners are showing keen interest to
support the innovation activity in the country. That Indiais a global platform for R&D has already been
demonstrated by the presence of more than hundred R&D
centres of MNCs in India. Now, India is aspiring to
establish itself as a manufacturing base for hi-tech
products and services. The growth of Indian Innovation
System in the coming years is expected to play a crucial
role in realization of this dream.
JOINT VENTURES/JOINT VENTURES/JOINT VENTURES/JOINT VENTURES/JOINT VENTURES/
ACQUISITIONS/ACQUISITIONS/ACQUISITIONS/ACQUISITIONS/ACQUISITIONS/
SUBSIDIARIESSUBSIDIARIESSUBSIDIARIESSUBSIDIARIESSUBSIDIARIES
Wockhardt Sets Up Joint Venturesin Mexico, South Africa
Drug company Wockhardt Ltd has formed twobusiness and marketing joint ventures in Mexico andSouth Africa respectively, besides setting up a wholly-owned subsidiary in Brazil. The new channels would befor marketing Wockhardts insulin and other bio-pharmaand diabetes-related products in the global market. Thepharmaceutical market in Mexico is valued at $7 billionand growing at 10 per cent.
TACO in Tie-up with UKs Stadco
Tata Auto Com Systems Ltd. (TACO), the automotivecomponents company from the Tata group, has enteredinto a 50:50 joint venture with UK-based Stadco Ltd.TACO Stadco Automotive, the new joint venture companywill offer a low-cost offshore body systems design anddevelopment resource for global component suppliers andvehicle makers.
The first phase of the new JV will see the establishmentof a product engineering centre in Pune, which will provide
European technology and know-how to Indian vehiclemakers seeking to develop new products and also offer aservice design and development capability to Europeanand US customers seeking to take advantage of low-costdesign engineering services.
GAIL Forms Joint Venture
with China Gas
GAIL (India) Ltd and the China Gas Holdings Ltd haveagreed to forge a strategic cooperative partnership byforming a 50:50 joint venture to undertake projects in
China.
The decision follows GAILs acquisition of up to 10per cent stake in China Gas Holdings, which has beenapproved by the board of the company.
The joint venture between GAIL and China GasHoldings will undertake the operation and management ofcity gas pipeline networks, including purchase, sale anddistribution of natural gas through these networks.
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The joint venture will also work for the construction,management and/or operation of long-distance natural gasand/or other energy fuel pipelines and purchase, import,produce, sell and distribute LPG, LNG, CNG and/or otherenergy fuel.
M&M Enters Middle East
through JV with Nippon
Tractors and utility vehicles major, Mahindra &Mahindra (M&M) has entered the manufacturingbusiness in the Middle East through a joint venture withthe worlds largest electrical steel maker Nippon SteelCorporation (NSC). The $28 billion NSC will hold a10 per cent stake in the joint venture and supply thenecessary raw material.
Nippons total steel production capacity has been
pegged at 35 million tonne. The total demand for electricalsteel has been pegged at 1.75 million tonne globally andNSC caters to around 20 per cent of this requirement.
Christened Mahindra Middleast Electrical Steel ServiceCentre, the joint venture will process electrical steel. Thestake is held through M&Ms wholly-owned arm, MahindraIntertrade Ltd (MIL), which has commenced operationsin Sharjah.
GAIL Inks Pact with Bangladesh Firm
State-run gas firm GAIL (India) Ltd. inked an
agreement with Spectra International Ltd. of Bangladeshto identify possibilities of cooperation in compressed naturalgas (CNG), infrastructure development projects and gasretailing in Bangladesh.
Under the terms of the MoU, GAIL would take upCNG and gas distribution projects on a build-own-operate-transfer basis. Spectra will offer certain services requiredin the implementation of projects in a cost-effective andtimely manner and provide necessary support andcoordination in obtaining all the statutory clearance.
TERI in Technology Tie-upwith US Vencap
The Energy Research Institute (TERI) has entered intoan agreement with GTI Ventures LIC, a US-based venturecapital organization, to tap the international market fortechnologies developed indigenously.
Among the technologies the partnership seeks tocommercialize and market technology such as using
a cocktail of bacterial to clean up oil spills and anotherto enhance oil recovery from old oil well usingmicrobes.
The microbial enhanced oil recovery process involvesinjecting bacteria into an oil well. These produce carbondioxide, methane and other substances, which raise theoil to the surface. The procedure has the potential tobring down the price of each barrel of oil by as much as35-40 per cent.
The Oilzapper developed by TERI and supported bythe Department of Biotechnology is another focusedtechnology. More than 5,000 hectare of croplandcontaminated by crude oil spills has been reclaimed indifferent parts of India and more than 30,000 tonnes ofoily sludge have been treated using the Oilzapper.
Lucas-TVS to Set Up Assembly
Plant in Iran
Lucas-TVS, part of the $2-billion TVS Group, hasfinalized plans to set up an assembly plant in Iran througha joint venture with a local company. The plant will startassembling starters for cars, and is scheduled to be readyby this year-end.
This will be the first overseas venture of this leadingauto electrical manufacturer, which expects to achieve a topline of Rs 625 crore in 2004-05. The company has threeplants in Chennai, Pondicherry and Rewari in India.
Macneill Engg. Floats Joint Venture
in Sri Lanka
Macneill Engineering Ltd has floated a 50:50 jointventure in Colombo with a Sri Lankan industrial group forexport of forklift trucks and other material handlingequipment on CKD basis, to begin with.
The joint venture company, christened MacneillEngineering Colombo Ltd, would assemble theconsignments that are imported on CKD basis before sellingthem in Sri Lanka.
The company plans to set up a plant in Sri Lanka formanufacturing forklift trucks and other material handlingequipment. The proposed manufacturing facility in SriLanka would entail an investment of $2 million in the firstphase and this amount would be generated from localsources.
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BEL Begins Export of
Surveillance RadarsPublic sector defence equipment major, Bharat
Electronics Ltd (BEL), has started exports of battlefieldsurveillance radars (BFSR) to Indonesia and Sudan andaims to achieve a total business of $15 million this financialyear. The product is developed indigenously by theBangalore-based Electronics and Radar DevelopmentEstablishment (LRDE), a DRDO unit, and manufacturedby BEL. The other export contracts signed by BEL duringthe year include a Rs 10 crore deal to supply solar modulesto Sudan and a $1.8 million order for building solar trafficsignal system for Surinam.
L&T Bags Rs 130-cr Order
from Kuwait Olefins
Larsen & Toubro has won an order worth Rs 130 crorefrom Kuwait Olefins Company KSC. The order is forsupply of a tubular reactor system. It will be executed byL&Ts Heavy Engineering Division. This equipment,weighing 1,500 mt, will be one of the largest such systemsin the world.
L&Ts Heavy Engineering Division is already executinganother contract valued at Rs. 45 crore for the supply of
a reactor for Equate Petrochemicals in Kuwait. Earlier,this division had successfully supplied such critical reactorsfor downstream petrochemical projects in China.
Trade Gap up at $26.5 bn
Despite recording a healthy 24 per cent growth inexports, Indias trade deficit during 2004-05 increased to$26.52 billion from $14.27 billion in 2003-04 owing to a35.62 per cent surge in imports. Imports rose mainly onaccount of high international crude oil prices.
Oil imports during the year rose 41 per cent to $29.08
billion during 2003-04, while non-oil imports during 2004-05 were estimated to be 33.62 per cent higher at $77.03billion.
According to provisional trade data released by theCommerce Department, exports during 2004-05 touchedthe $79.59 billion mark, a growth of over 24.41 per centover the previous year. The government had set an exporttarget of 16 per cent corresponding to a value of $73.4billion.
Some more trade returns are expected in the nextfew weeks and the total export figure is thus expected to
register a further increase, as per an official release.
Imports during April-March 2004 exceeded the exportgrowth rate during the fiscal, increasing by 35.62 per centto $106 billion against $78.25 billion mainly on account ofoil imports.
Export growth during March was, however, low atjust 8.28 per cent at $8.51 billion compared with $7.86billion in the same month the previous year. The exportsgrowth in rupee terms clocked during the month was lowerat 5 per cent valued at Rs. 37,196.06 crore.
Imports during March increased by 25.52 per cent to
$10.08 billion compared with $ 8.03 billion during March2004.
OVL Bags 300-mn Barrel
Oilfield in Qatar
Oil and Natural Gas Corpn. (ONGC) won a 300-million barrels oilfield in Qatar, the 12th country, thecompany has forayed in search for oil security for thecountry. ONGCs foreign arm (OVL) won the rights todevelop and produce oil from Nijwat oil in Qatar. The fieldis estimated to hold 300 million barrels of oil reserves.ONGC has stakes in projects in Russia, Vietnam, Sudan,Libya, Syria, Iran, Iraq, Ivory Coast, Egypt, Myanmar andAustralia, and hopes to produce 400,000 barrels a dayfrom overseas assets by 2010-11.
IRCON Bags Contract from
Bangladesh Rlys
IRCON International bagged a Rs. 31.9 crore contractfrom Bangladesh Railways for modernizing its signalingand interlocking systems. The scope of work involvesdesign, supply, installation and commissioning of micro-processor-based signaling system to be completed in 18months. In the meanwhile, it has bagged another exportorder from the Government of Nepal for Rs. 63 crore forstrengthening and upgrading its East-West Highway inNepal. Asian Development Bank (ADB) will fund theproject. The work comprises strengthening of 140 km ofEast-West Highway and is scheduled to be completed in24 months.
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RECENT POLICY INITIATIVES
Foreign Trade Policy Gives
Sectoral Push
The annual supplement to the five-year Foreign TradePolicy for 2004-09 has proposed the abolition of exportcess on all agricultural commodities and eased the normsunder the export promotion capital goods scheme.
While the diluted export obligation norms will benefitthe small-scale and agriculture sectors, the schemescoverage has been extended to the retail business.
Setting a 15 per cent increase in the export target to$92 billion for the current year, Commerce Minister KamalNath announced import duty concessions to the gems &jewellery, marine, dairy and poultry sectors.
The policy proposed the setting up of an Inter-StateCouncil to help state governments promote internationaltrade and promised to modify the Target Plus schemeaimed at rewarding incremental exports.
Though the policy was silent on the new scheme toreplace the Duty Entitlement Passbook Scheme, itcontained several measures to liberalize existing ones likethe advance licence scheme to enhance its coverage toinclude all categories of exporters with past performance.
The Minister also announced that Prime Minister Dr.
Manmohan Singh had directed that all outstanding incometax claims under the DEPB be put on hold till the issuewas resolved by the Prime Ministers Economic AdvisoryCouncil. Several other contentious issues, including servicetax exemption to export oriented units and the sunset clausefor phasing out tax benefits to EOUs have also been referredto the Council. Under the modified EPCG scheme,exporters who complete 75 per cent of their exportobligation in four years rather than eight years will be freedfrom fulfilling the balance export obligation. Further,imports made by the agriculture sector have been alloweda lower export obligation of six times the duty saved over
12 years instead of eight years. The export obligation hasalso been reduced for the small-scale sector.
Norms for imports of machinery have been eased forthe retail and marine sector under the EPCG scheme. Thethree categories of advance licence have been merged intoa single category and the annual entitlement has beenincreased to three times the exports from two times earlier.Similarly, duty free benefits under the Vishesh Krishi UpajYojana have been extended to poultry and dairy products.
The quantum of bank guarantee for units in AgriExports Zones, established service providers and othermanufacturer-exporters has been reduced from 25 percent to 15 per cent.
In keeping with the objective of reducing thetransaction costs for exporters, the Directorate Generalof Foreign Trade has introduced a single commonapplication form called the Aayat Niryat Form whichreduced the documents required from 120 to 50.
The Patents Act 2005
The new patent law allows product patents on drugs,as well as food and agro-chemicals. The earlier patent lawallowed process patents in these sectors, meaning productspatented elsewhere could be reverse engineered, ensuringa different manufacturing process, and sold in India.
The fear has been that with product patents in pharma,
drug costs will go up as foreign patents holders startcharging premium prices.
That fear was always exaggerated because more than90 per cent of drugs listed as essentials in India are eitherunpatented or off-patent (that is, their patent period hasexpired). Plus, drugs patented elsewhere before 1995 willnot be eligible for Indian patents even under the new Act.This is because the WTO clock started ticking for India in1995.It had 10 years to get a new law, hence theGovernments urgency in 2005. However, India wasrequired to open a facility called the mailbox to acceptproduct patent applications in drugs, as well as food andagro-chemicals from 1995. This created the apprehensionthat Indian copycat drugs generic drugs of patentsfiled post 1995 will be pulled out of the market and replacedby more expensive patented varieties.
The December 2004 ordinance said precisely thatalthough it didnt allow retrospective suing of Indian genericproducers by patent holders, the amendment in the Act allowsproduction of post 1995 generics provided Indianmanufacturers pay a reasonable royalty to the patent holder.
For the Indian consumers this means the real bite ofnew Act will come mostly with foreign patents given in
future. No copycatting will be allowed then.For the Indian pharma industry, this amendment is a
relief as well. It will be relieved that the Act narrows downthe definition of patentability. The Act tries to preventforeign companies from claiming new product patents onexisting drugs by making superfluous changes (calledever-greening). It says a pharma patent will have to be anew entity involving one or more inventive steps. It alsosays new use of an existing product will not be patentable.
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The Act also, unlike the Ordinance, allows stronger pre-grant opposition. Indian pharma companies challenging apatent before it is granted have six months from the publishingdate of the patent and can be party to legal proceedings.
The third fear was availability of Indian drugs to poorcountries. The Ordinance had required the importing countryto issue a compulsory licence (an order that allows violationof patent rights and general production for public interest).Many poor countries could have missed out on Indian drugsunder this procedure. The Act allows exports even if theimporting country merely notifies its requirement.
More, Indian firms that are producing under compulsorylicence for the domestic market can also export their productto poor nations. This will help the pharma sector retain a keypart of its business.
The Indian Patent Act 1970 did not allow patenting ofsoftware but only copyright. The Patent Ordinance 2004
permitted patenting of embedded software but the PatentsAct 2005 has dropped protection to embedded softwareprovided by the Patents Amendment Act Ordinance 2004.One line of belief in industry is that allowing patenting ofsoftware embedded with hardware as also software-hardware combination would have helped innovative SMEsin the IT sector since there is an increasing awarenessamong Indian ICT companies that IP is a valuable businessasset that drives business strategy to create revenue streamthat also fuel a nations economic growth. Other line ofbelief is that if embedded software were protected, therewould be potential for conflict between hardware and
software producers. Software patents may inhibitdevelopment of new hardware patents since a number ofhardware/software combinations might be possible indeveloping different solutions.
Exim Bank to Aid Pharma
Cos. Go Global
The Export-Import Bank of India (Exim Bank) is keenon helping Indian pharma companies expand their globalfootprint. After having aided Mumbai-based HikalChemicals to buy a European unit, the bank is reportedlyworking with four Indian pharma companies eyeing anEuropean foray.
Indian pharma companies have been in the forefrontof filing for drug master files (DMFs) and abbreviatednew drug applications (ANDA). In 2003, we filed 100DMFs and 73 ANDAs which accounted for 30 per centof the global filings while in 2004, the 161 ANDAs filedaccounted for 33 per cent of the global filings.
There were two clear opportunities for Indian pharmacompanies. While one related to setting up manufacturingventures for formulation and the like in markets like theCIS, the other related to contract research and out-licensing. The bank had inked an MoU with Mysore-basedCentral Food Technological Research Institute for
commercializing user-friendly food technology developedby the institute notably to tap countries in Africa wheresuch technology was found to be extremely useful.
On the banks future strategies, it intends to continueas an institution financing Indias global market thrust.
TDB to Receive Entire Cess on
Technology Imports by 2006-07
Finance Minister P. Chidambaram, has said that the entirecess on import of technology collected till date would bepassed on to the Technology Development Board (TDB).
He said the shortfall of Rs 481 crore will be met partially thisfiscal and fully by the next fiscal. Since 1996-97, the Govern-ment had been imposing a cess on import of technology.While the Government has collected Rs 916 crore on accountof the cess, it has disbursed Rs 435 crore to the TDB.
Budget allocation, he said, is not a constraint forscience and technology. The Government will continue tosupport the technology development. With intellectualproperty rights regime, he asked India Inc to step up R&Dspends and convert the emerging challenges into oppor-tunities, as has been done by pharma companies.
PROJECT PROPOSALS INVITED
FOR COMPILATION OF
EXPORTABLE TECHNOLOGIES/
PROJECTS FROM SMEs: STATEWISE(For details visit website: dsir.nic.in/dsir.gov.in)
INTERNATIONAL TECHNOLOGY
TRANSFER PROGRAMME
(ITTP)
Department of Scientific andIndustrial Research
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TECHNOLOGY EXPOR12
NEW STUDIES
Centre for International Trade in Technology (CITT),IIFT, has now taken up the following studies with thesupport of DSIR, Ministry of S&T, Govt. of India.
Foreign R&D Centres in India
India is being projected as a hub for theInternational R&D activities, and over one hundredforeign R&D centres are reported to have beenestablished. The primary objective of the study is toknow about their experiences, intellectual propertygenerated, and contributions to the national R&D andinnovation systems. The study may also suggestmeasures towards strengthening the presentmechanisms, if necessary.
Role and Influence of Technologyin Mergers and Acquisitions
Several companies in India are opting for mergersand acquisitions as one of the routes for growth andcompetitiveness. There could be several guidingfactors for this, including technology transfer andleadership. The study essentially aims atdocumenting the experiences of such mergers &acquisitions in recent years in India in technologyintensive sectors as (a) Automobile, (b) Electronics(c) Drugs & Pharma-ceuticals (d) Specialty Chemicals(e) Plants & Machinery, and (f) Textiles.
Bill Seeks to Raise
SSI Investment limit
The Small and Medium Enterprises Development Bill2005, introduced recently by the Government in the LokSabha seeks to raise the investment ceiling from Rs 1
crore to Rs 5 crore for small-scale industrial units. Mediumenterprises (which at present, have no legal definition),are sought to be made into a separate category whereinvestment in plant and machinery is over Rs 5 crore butnot exceeding Rs 10 crore.
The bill, which was introduced by the Small-ScaleIndustries Minister Mahabir Prasad, defines smallenterprises in the services sector as those where theinvestment in equipment does not exceed Rs 2 crore.Similarly, a medium enterprise in the services sector wouldhave investment in equipment of over Rs 2 crore but lessthan Rs 5 crore.
This bill seeks to ensure timely and smooth flow ofcredit to small and medium enterprises. It also seeks toempower the Centre and the states to notify preferencepolicies in respect of procurement of goods and services
of small units. A provision has been included for creatinga fund for promoting, developing and enhancing thecompetitiveness of small and medium enterprises.
4% Tax Sop to SEZ Goods
Sold to DTA
The Finance Ministry has notified that goods producedor manufactured in a special economic zone and broughtto any other place in India are exempted from the 4 percent additional duty of customs.
The Revenue Department has issued a notification tothis effect under the Customs Act. The notification hasbeen issued after the Export Promotion Council for EOUsand SEZ units made representations to the Finance Ministryon this issue.
The Central Excise Department had on 1st March 2005
issued a notification exempting goods sold from EOUsand SEZs respectively to the DTA from the levy of 4 percent additional duty of customs.
Dear Readers,
Indian Institute of Foreign Trade (IIFT) in collaboration with
Department of Scientific & Industrial Research (DSIR) brings
out Quarterly Newsletter, Technology Exports.
The Newsletter aims to familiarise trade & industry with thelatest happenings and to bring out the policy analysis in the
field of technology exports.
We have received encouraging responses from Indian missions
abroad, embassies in India and trade & industry. Words of
praise, especially coming from various Indian missions have
been extremely fulfilling and inspiring for us.
While positive responses are highly encouraging, we believe
continued Readers Feedback will be the key factor not only
for improving the contents but also for maintaining sustained
interest.
Therefore, we at Technology Exportswelcome Readers
valuable suggestions, inputs and constructive ideas. We wouldappreciate receiving specific information such as lead articles,
exportable technological developments, achievements in
technology related exports, etc., for publication in the Newsletter.
Such information may be addressed to: Editor, Technology
Exports, Indian Institute of Foreign Trade, B-21 Qutab
Institutional Area, New Delhi-110 016.
E-mail: [email protected]
Website: www.iift.edu
FEEDBACK