India Innovation Exports

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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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TECHNOLOGY EXPOR8

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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INDIAS TECHNOLOGY EXPORT EFFORTSINDIAS TECHNOLOGY EXPORT EFFORTSINDIAS TECHNOLOGY EXPORT EFFORTSINDIAS TECHNOLOGY EXPORT EFFORTSINDIAS TECHNOLOGY EXPORT EFFORTS

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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TECHNOLOGY EXPOR10

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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APRIL-JUNE2005 11

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

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