VOL. VII NO.

APRIL-JUNE 2005

INDIAN INNOVATION SYSTEM

Perspective and Challenges
Ashwani Gupta and P.K. Dutta*

1. INTRODUCTION

NNOVATION has been one of the key determinants

of competitiveness in global firms. This term refers
not only to new scientific and technological inventions,
but also to system changes and the manner of doing
business. 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 share
in 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 viable
idea 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* Shri Ashwani Gupta is Scientist-F and Dr. P.K. Dutta is Scientist-D in
Department of Scientific and Industrial Research, Ministry of Science
and 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.

commercial stage is done. The third phase is called the

Growth Phase wherein the pilot production is upscaled 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.
MECHANISMS SUPPORTING TRANSFORMATION
OF IDEA TO PROTOTYPE
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. having
innovative 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.

EDITORIAL BOARD
Rajiv Yadav
India Trade Promotion Organisation

Ashwani Gupta
Department of Scientific & Industrial
Research

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

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

EDITOR
Anil K. Kanungo

Society for Research and Initiatives for Sustainable Technologies and

Institutions (SRISTI), Ahmedabad

ISSN 0972-1460

Gujarat Grassroots Innovations Augmentation Network (GIAN), Ahmedabad

Sustainable-Agriculture & Environmental Voluntary Action (SEVA)

Rural Innovations Network (RIN)

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Some of the mechanisms for nurturing innovations are:

MECHANISMS SUPPORTING TRANSFORMATION OF PROTOTYPE TO PILOT PLANT

2.1.4 Technology Development and Demonstration Programme
(erstwhile PATSER)
The Technology Development and Demonstration Programme (TDDP) of
DSIR 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.
TECHNOLOGY EXPORTS

Packaging Technology, Integrated Pilot Demonstration

Plant for Spice Processing, Automatic Brick Making
Machine, etc.

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 of
the 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

2.1.5 Home Grown Technology Programme (HGTP)

The Home Grown Technology Programme (HGTP),
a mechanism of Technology Information Forecasting and
Assessment 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

FIGURE 1 : INDIAN INNOVATION SYSTEM MODEL

IDEA/INNOVATION

BIRTH PHASE
IDEA SOURCE

GROWTH PHASE

Dependence on Support
Mechanisms Optional

Formal :
1. Public / Private funded
Universities/ Institutes
2. Public/ Private funded
R&D Laboratories/
Establishments
3. In-house R&D Centres
of Industry
4. SIROs
5. Start-up Companies

Idea

Proof of Concept
Prototype/ Working
Model

Commercial Product/
Process

Pilot Plant Stage/PreCommercial Trials/

Validation

Support Mechanisms

1. TDDP (Erstwhile
PATSER)
2. HGTP
3. PRDSF
4. Venture Capital Funding
* SIDBI
* ICICI- SPREAD
Idea

Dependence on
Support Mechanisms Required

Funding Support Mechanisms

Institutional

Funding

Informal:
1. Individual: Students, Teachers,
Artisans, Farmers,
etc.
2. NGOs
3. Unrecognized Industries

APRIL-JUNE 2005

SURVIVAL PHASE

1. STEPs
DST
2. TBIs

SIROs
NGOs
TePP
NIF
GIAN
SRISTI

SEVA

Institutional

Funding

RIN
CIIE

1. NIF Scouting of Ideas

and Awards
2. NGOs: GIAN, SEVA, SRISTI, RIN
3. CIIE
4. Young Inventors Initiative
(Steer the Big Idea)

TePP

NMITLI

TDDP

HGTP
SIDBI
STEPs
TBIs
PRDSF

1.
2.
3.
4.

TDB
NMITLI
PRDSF
Venture Capital Funding
* SIDBI
* ICICI- SPREAD

Scientific and Industrial Research Organisations

Non-Governmental Organisations
Technopreneur Promotion Programme
National Innovation Foundation
Grassroots Innovators Augmentation Network
Society for Research Initiatives for
Sustainable Technologies and Institution
Sustainable Agricultural & Environmental
Voluntary Action
Rural Innovators Network
Centre for Innovation, Incubation and
Entrepreneurship
New Millennium Indian Technology Leadership
Initiative
Technology Development and Demonstration
Programme
Home Grown Technology Programme
Small Industries Development Board of India
Science & Technology Enterpreneurship Parks
Technology Business Incubators
Pharmaceutical Research and Development
Support Fund

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 indigenous research and development. HGTP
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 Industries
Development 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 Technology
persons, 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
TECHNOLOGY EXPORTS

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 20002001. 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.
MECHANISMS SUPPORTING TRANSFORMATION OF PILOT
PLANT TO COMMERCIAL PRODUCT
2.1.9 Technology Development Board (TDB)
Technology Development Board (TDB) was set up by
Government of India on 1st September 1996 and the
operation 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.

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
position in a few selected niche areas by leveraging
innovation-centric scientific and technological developments 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 areas
such as nano material catalysts, industrial chemicals, genebased new targets for advanced drug delivery systems,
bio-technology, bio-informatics, low cost office
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
IDEA TO PROTOTYPE PHASE

2.1.10 Drug Development Programme and Pharmaceuticals Research and Development Support
Fund (PRDSF)
The Department of Science and Technology (DST)
launched a Drug Development Programme during 199495 for promoting collaborative R&D in drugs &
pharmaceuticals sector involving industries and
institutions. Fifty projects have been supported under the
Programme involving 22 institutions and R&D
establishments and 23 industries. These projects were about
development 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
APRIL-JUNE 2005

(i) Lack of Proper System for Screening

and Evaluation of Ideas
(ii) Not Enough Support Mechanisms/Programmes to
Nurture Innovative Ideas to Prototype Stage
PROTOTYPE TO PILOT PLANT PHASE
(iii) Lack of Awareness about Funding Mechanisms
(iv) Low User Friendliness of Funding Mechanisms
PILOT PLANT TO COMMERCIAL PHASE
(v)

Complex and Expensive IPR Protection System

(vi) Disputes Regarding Ownership of Intellectual

Property Generated
(vii) Lack of Adequate Market Information for
Innovative Products

GENERAL
(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

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

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 well as the expert panels
would not only avoid processing of new applications
on ideas already considered in the past but would also
lead 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 TePPlike initiatives in their respective states. Operational aspects
of TePP initiative, e.g. screening of applications and project
monitoring could be outsourced to universities, technical
institutes, 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

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.
TECHNOLOGY EXPORTS

(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 or
commercial 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 India
is 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.

APRIL-JUNE 2005

JOINT VENTURES/
ACQUISITIONS/
SUBSIDIARIES
Wockhardt Sets Up Joint Ventures
in Mexico, South Africa
Drug company Wockhardt Ltd has formed two
business and marketing joint ventures in Mexico and
South Africa respectively, besides setting up a whollyowned subsidiary in Brazil. The new channels would be
for marketing Wockhardts insulin and other bio-pharma
and diabetes-related products in the global market. The
pharmaceutical market in Mexico is valued at $7 billion
and growing at 10 per cent.

TACO in Tie-up with UKs Stadco

Tata Auto Com Systems Ltd. (TACO), the automotive
components company from the Tata group, has entered
into a 50:50 joint venture with UK-based Stadco Ltd.
TACO Stadco Automotive, the new joint venture company
will offer a low-cost offshore body systems design and
development resource for global component suppliers and
vehicle makers.
The first phase of the new JV will see the establishment
of a product engineering centre in Pune, which will provide
European technology and know-how to Indian vehicle
makers seeking to develop new products and also offer a
service design and development capability to European
and US customers seeking to take advantage of low-cost
design engineering services.

GAIL Forms Joint Venture

with China Gas
GAIL (India) Ltd and the China Gas Holdings Ltd have
agreed to forge a strategic cooperative partnership by
forming a 50:50 joint venture to undertake projects in
China.
The decision follows GAILs acquisition of up to 10
per cent stake in China Gas Holdings, which has been
approved by the board of the company.
The joint venture between GAIL and China Gas
Holdings will undertake the operation and management of
city gas pipeline networks, including purchase, sale and
distribution of natural gas through these networks.

The joint venture will also work for the construction,

management and/or operation of long-distance natural gas
and/or other energy fuel pipelines and purchase, import,
produce, sell and distribute LPG, LNG, CNG and/or other
energy fuel.

M&M Enters Middle East

through JV with Nippon

a cocktail of bacterial to clean up oil spills and another

to enhance oil recovery from old oil well using
microbes.
The microbial enhanced oil recovery process involves
injecting bacteria into an oil well. These produce carbon
dioxide, methane and other substances, which raise the
oil to the surface. The procedure has the potential to
bring down the price of each barrel of oil by as much as
35-40 per cent.

Tractors and utility vehicles major, Mahindra &

Mahindra (M&M) has entered the manufacturing
business in the Middle East through a joint venture with
the worlds largest electrical steel maker Nippon Steel
Corporation (NSC). The $28 billion NSC will hold a
10 per cent stake in the joint venture and supply the
necessary raw material.

The Oilzapper developed by TERI and supported by

the Department of Biotechnology is another focused
technology. More than 5,000 hectare of cropland
contaminated by crude oil spills has been reclaimed in
different parts of India and more than 30,000 tonnes of
oily sludge have been treated using the Oilzapper.

Nippons total steel production capacity has been

pegged at 35 million tonne. The total demand for electrical
steel has been pegged at 1.75 million tonne globally and
NSC caters to around 20 per cent of this requirement.

Lucas-TVS to Set Up Assembly

Plant in Iran

Christened Mahindra Middleast Electrical Steel Service

Centre, the joint venture will process electrical steel. The
stake is held through M&Ms wholly-owned arm, Mahindra
Intertrade Ltd (MIL), which has commenced operations
in Sharjah.

GAIL Inks Pact with Bangladesh Firm

State-run gas firm GAIL (India) Ltd. inked an
agreement with Spectra International Ltd. of Bangladesh
to identify possibilities of cooperation in compressed natural
gas (CNG), infrastructure development projects and gas
retailing in Bangladesh.
Under the terms of the MoU, GAIL would take up
CNG and gas distribution projects on a build-own-operatetransfer basis. Spectra will offer certain services required
in the implementation of projects in a cost-effective and
timely manner and provide necessary support and
coordination in obtaining all the statutory clearance.

TERI in Technology Tie-up

with US Vencap
The Energy Research Institute (TERI) has entered into
an agreement with GTI Ventures LIC, a US-based venture
capital organization, to tap the international market for
technologies developed indigenously.
Among the technologies the partnership seeks to
commercialize and market technology such as using

Lucas-TVS, part of the $2-billion TVS Group, has

finalized plans to set up an assembly plant in Iran through
a joint venture with a local company. The plant will start
assembling starters for cars, and is scheduled to be ready
by this year-end.
This will be the first overseas venture of this leading
auto electrical manufacturer, which expects to achieve a top
line of Rs 625 crore in 2004-05. The company has three
plants in Chennai, Pondicherry and Rewari in India.

Macneill Engg. Floats Joint Venture

in Sri Lanka
Macneill Engineering Ltd has floated a 50:50 joint
venture in Colombo with a Sri Lankan industrial group for
export of forklift trucks and other material handling
equipment on CKD basis, to begin with.
The joint venture company, christened Macneill
Engineering Colombo Ltd, would assemble the
consignments that are imported on CKD basis before selling
them in Sri Lanka.
The company plans to set up a plant in Sri Lanka for
manufacturing forklift trucks and other material handling
equipment. The proposed manufacturing facility in Sri
Lanka would entail an investment of $2 million in the first
phase and this amount would be generated from local
sources.

TECHNOLOGY EXPORTS

KALEIDOSCOPE OF
INDIAS TECHNOLOGY EXPORT EFFORTS

BEL Begins Export of

Surveillance Radars

Some more trade returns are expected in the next

few weeks and the total export figure is thus expected to
register a further increase, as per an official release.

Public sector defence equipment major, Bharat

Electronics Ltd (BEL), has started exports of battlefield
surveillance radars (BFSR) to Indonesia and Sudan and
aims to achieve a total business of $15 million this financial
year. The product is developed indigenously by the
Bangalore-based Electronics and Radar Development
Establishment (LRDE), a DRDO unit, and manufactured
by BEL. The other export contracts signed by BEL during
the year include a Rs 10 crore deal to supply solar modules
to Sudan and a $1.8 million order for building solar traffic
signal system for Surinam.

Imports during April-March 2004 exceeded the export

growth rate during the fiscal, increasing by 35.62 per cent
to $106 billion against $78.25 billion mainly on account of
oil imports.

L&T Bags Rs 130-cr Order

from Kuwait Olefins
Larsen & Toubro has won an order worth Rs 130 crore
from Kuwait Olefins Company KSC. The order is for
supply of a tubular reactor system. It will be executed by
L&Ts Heavy Engineering Division. This equipment,
weighing 1,500 mt, will be one of the largest such systems
in the world.
L&Ts Heavy Engineering Division is already executing
another 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 reactors
for downstream petrochemical projects in China.

Trade Gap up at $26.5 bn

Despite recording a healthy 24 per cent growth in
exports, Indias trade deficit during 2004-05 increased to
$26.52 billion from $14.27 billion in 2003-04 owing to a
35.62 per cent surge in imports. Imports rose mainly on
account 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 200405 were estimated to be 33.62 per cent higher at $77.03
billion.
According to provisional trade data released by the
Commerce Department, exports during 2004-05 touched
the $79.59 billion mark, a growth of over 24.41 per cent
over the previous year. The government had set an export
target of 16 per cent corresponding to a value of $73.4
billion.
APRIL-JUNE 2005

Export growth during March was, however, low at

just 8.28 per cent at $8.51 billion compared with $7.86
billion in the same month the previous year. The exports
growth in rupee terms clocked during the month was lower
at 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 March
2004.

OVL Bags 300-mn Barrel

Oilfield in Qatar
Oil and Natural Gas Corpn. (ONGC) won a 300million barrels oilfield in Qatar, the 12th country, the
company has forayed in search for oil security for the
country. ONGCs foreign arm (OVL) won the rights to
develop and produce oil from Nijwat oil in Qatar. The field
is 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 and
Australia, and hopes to produce 400,000 barrels a day
from overseas assets by 2010-11.

IRCON Bags Contract from

Bangladesh Rlys
IRCON International bagged a Rs. 31.9 crore contract
from Bangladesh Railways for modernizing its signaling
and interlocking systems. The scope of work involves
design, supply, installation and commissioning of microprocessor-based signaling system to be completed in 18
months. In the meanwhile, it has bagged another export
order from the Government of Nepal for Rs. 63 crore for
strengthening and upgrading its East-West Highway in
Nepal. Asian Development Bank (ADB) will fund the
project. The work comprises strengthening of 140 km of
East-West Highway and is scheduled to be completed in
24 months.

RECENT POLICY INITIATIVES

Foreign Trade Policy Gives
Sectoral Push
The annual supplement to the five-year Foreign Trade
Policy for 2004-09 has proposed the abolition of export
cess on all agricultural commodities and eased the norms
under the export promotion capital goods scheme.
While the diluted export obligation norms will benefit
the small-scale and agriculture sectors, the schemes
coverage 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 Kamal
Nath announced import duty concessions to the gems &
jewellery, marine, dairy and poultry sectors.
The policy proposed the setting up of an Inter-State
Council to help state governments promote international
trade and promised to modify the Target Plus scheme
aimed at rewarding incremental exports.
Though the policy was silent on the new scheme to
replace the Duty Entitlement Passbook Scheme, it
contained several measures to liberalize existing ones like
the advance licence scheme to enhance its coverage to
include all categories of exporters with past performance.
The Minister also announced that Prime Minister Dr.
Manmohan Singh had directed that all outstanding income
tax claims under the DEPB be put on hold till the issue
was resolved by the Prime Ministers Economic Advisory
Council. Several other contentious issues, including service
tax exemption to export oriented units and the sunset clause
for phasing out tax benefits to EOUs have also been referred
to the Council. Under the modified EPCG scheme,
exporters who complete 75 per cent of their export
obligation in four years rather than eight years will be freed
from fulfilling the balance export obligation. Further,
imports made by the agriculture sector have been allowed
a lower export obligation of six times the duty saved over
12 years instead of eight years. The export obligation has
also been reduced for the small-scale sector.
Norms for imports of machinery have been eased for
the retail and marine sector under the EPCG scheme. The
three categories of advance licence have been merged into
a single category and the annual entitlement has been
increased to three times the exports from two times earlier.
Similarly, duty free benefits under the Vishesh Krishi Upaj
Yojana have been extended to poultry and dairy products.

10

The quantum of bank guarantee for units in Agri

Exports Zones, established service providers and other
manufacturer-exporters has been reduced from 25 per
cent to 15 per cent.
In keeping with the objective of reducing the
transaction costs for exporters, the Directorate General
of Foreign Trade has introduced a single common
application form called the Aayat Niryat Form which
reduced 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 law
allowed process patents in these sectors, meaning products
patented elsewhere could be reverse engineered, ensuring
a 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 start
charging premium prices.
That fear was always exaggerated because more than
90 per cent of drugs listed as essentials in India are either
unpatented or off-patent (that is, their patent period has
expired). Plus, drugs patented elsewhere before 1995 will
not be eligible for Indian patents even under the new Act.
This is because the WTO clock started ticking for India in
1995.It had 10 years to get a new law, hence the
Governments urgency in 2005. However, India was
required to open a facility called the mailbox to accept
product patent applications in drugs, as well as food and
agro-chemicals from 1995. This created the apprehension
that Indian copycat drugs generic drugs of patents
filed post 1995 will be pulled out of the market and replaced
by more expensive patented varieties.
The December 2004 ordinance said precisely that
although it didnt allow retrospective suing of Indian generic
producers by patent holders, the amendment in the Act allows
production of post 1995 generics provided Indian
manufacturers pay a reasonable royalty to the patent holder.
For the Indian consumers this means the real bite of
new 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 down
the definition of patentability. The Act tries to prevent
foreign companies from claiming new product patents on
existing drugs by making superfluous changes (called
ever-greening). It says a pharma patent will have to be a
new entity involving one or more inventive steps. It also
says new use of an existing product will not be patentable.
TECHNOLOGY EXPORTS

The Act also, unlike the Ordinance, allows stronger pregrant opposition. Indian pharma companies challenging a
patent before it is granted have six months from the publishing
date of the patent and can be party to legal proceedings.
The third fear was availability of Indian drugs to poor
countries. The Ordinance had required the importing country
to issue a compulsory licence (an order that allows violation
of patent rights and general production for public interest).
Many poor countries could have missed out on Indian drugs
under this procedure. The Act allows exports even if the
importing country merely notifies its requirement.
More, Indian firms that are producing under compulsory
licence for the domestic market can also export their product
to poor nations. This will help the pharma sector retain a key
part of its business.
The Indian Patent Act 1970 did not allow patenting of
software but only copyright. The Patent Ordinance 2004
permitted patenting of embedded software but the Patents
Act 2005 has dropped protection to embedded software
provided by the Patents Amendment Act Ordinance 2004.
One line of belief in industry is that allowing patenting of
software embedded with hardware as also softwarehardware combination would have helped innovative SMEs
in the IT sector since there is an increasing awareness
among Indian ICT companies that IP is a valuable business
asset that drives business strategy to create revenue stream
that also fuel a nations economic growth. Other line of
belief is that if embedded software were protected, there
would be potential for conflict between hardware and
software producers. Software patents may inhibit
development of new hardware patents since a number of
hardware/software combinations might be possible in
developing different solutions.

Exim Bank to Aid Pharma

Cos. Go Global
The Export-Import Bank of India (Exim Bank) is keen
on helping Indian pharma companies expand their global
footprint. After having aided Mumbai-based Hikal
Chemicals to buy a European unit, the bank is reportedly
working with four Indian pharma companies eyeing an
European foray.
Indian pharma companies have been in the forefront
of filing for drug master files (DMFs) and abbreviated
new drug applications (ANDA). In 2003, we filed 100
DMFs and 73 ANDAs which accounted for 30 per cent
of the global filings while in 2004, the 161 ANDAs filed
accounted for 33 per cent of the global filings.
APRIL-JUNE 2005

There were two clear opportunities for Indian pharma

companies. While one related to setting up manufacturing
ventures for formulation and the like in markets like the
CIS, the other related to contract research and outlicensing. The bank had inked an MoU with Mysore-based
Central Food Technological Research Institute for
commercializing user-friendly food technology developed
by the institute notably to tap countries in Africa where
such technology was found to be extremely useful.
On the banks future strategies, it intends to continue
as 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 entire
cess on import of technology collected till date would be
passed on to the Technology Development Board (TDB).
He said the shortfall of Rs 481 crore will be met partially this
fiscal and fully by the next fiscal. Since 1996-97, the Government had been imposing a cess on import of technology.
While the Government has collected Rs 916 crore on account
of the cess, it has disbursed Rs 435 crore to the TDB.
Budget allocation, he said, is not a constraint for
science and technology. The Government will continue to
support the technology development. With intellectual
property rights regime, he asked India Inc to step up R&D
spends and convert the emerging challenges into opportunities, as has been done by pharma companies.

Department of Scientific and

Industrial Research
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)
11

Bill Seeks to Raise

SSI Investment limit
The Small and Medium Enterprises Development Bill
2005, introduced recently by the Government in the Lok
Sabha seeks to raise the investment ceiling from Rs 1
crore to Rs 5 crore for small-scale industrial units. Medium
enterprises (which at present, have no legal definition),
are sought to be made into a separate category where
investment in plant and machinery is over Rs 5 crore but
not exceeding Rs 10 crore.
The bill, which was introduced by the Small-Scale
Industries Minister Mahabir Prasad, defines small
enterprises in the services sector as those where the
investment in equipment does not exceed Rs 2 crore.
Similarly, a medium enterprise in the services sector would
have investment in equipment of over Rs 2 crore but less
than Rs 5 crore.
This bill seeks to ensure timely and smooth flow of
credit to small and medium enterprises. It also seeks to
empower the Centre and the states to notify preference
policies in respect of procurement of goods and services

of small units. A provision has been included for creating

a fund for promoting, developing and enhancing the
competitiveness of small and medium enterprises.

4% Tax Sop to SEZ Goods

Sold to DTA
The Finance Ministry has notified that goods produced
or manufactured in a special economic zone and brought
to any other place in India are exempted from the 4 per
cent additional duty of customs.
The Revenue Department has issued a notification to
this effect under the Customs Act. The notification has
been issued after the Export Promotion Council for EOUs
and SEZ units made representations to the Finance Ministry
on this issue.
The Central Excise Department had on 1st March 2005
issued a notification exempting goods sold from EOUs
and SEZs respectively to the DTA from the levy of 4 per
cent additional duty of customs.

FEEDBACK
NEW STUDIES
Centre for International Trade in Technology (CITT),
IIFT, has now taken up the following studies with the
support of DSIR, Ministry of S&T, Govt. of India.
Foreign R&D Centres in India
India is being projected as a hub for the
International R&D activities, and over one hundred
foreign R&D centres are reported to have been
established. The primary objective of the study is to
know about their experiences, intellectual property
generated, and contributions to the national R&D and
innovation systems. The study may also suggest
measures towards strengthening the present
mechanisms, if necessary.

Role and Influence of Technology

in Mergers and Acquisitions

Several companies in India are opting for mergers

and acquisitions as one of the routes for growth and
competitiveness. There could be several guiding
factors for this, including technology transfer and
leadership. The study essentially aims at
documenting the experiences of such mergers &
acquisitions in recent years in India in technology
intensive sectors as (a) Automobile, (b) Electronics
(c) Drugs & Pharma-ceuticals (d) Specialty Chemicals
(e) Plants & Machinery, and (f) Textiles.

12

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 the
latest 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 Exports welcome Readers
valuable suggestions, inputs and constructive ideas. We would
appreciate 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: akanungo@iift.ac.in
Website: www.iift.edu

TECHNOLOGY EXPORTS