In a boost to telecom manufacturing in India, the government plans to set up a $1-billion (Rs 6,200-crore) venture capital (VC) fund, which will take into account the technology and not return on capital as a measure of success.
The draft note, proposed by the National Manufacturing Competitiveness Council (NMCC) and the Department of Telecommunications (DoT), will soon be sent to Prime Minister Manmohan Singh for his approval.
The fund is part of a proposed commitee floated by the NMCC and the DoT with a mandate to identify the sourcing of raw material, special research and development support and innovation required for manufacturing telecom equipments in India.
The committee is likely to be headed by Sam Pitroda, adviser to the Prime Minister on public information infrastructure and innovations and chairman, National Innovation Council; Vinod Khosla, head of Khosla Ventures and Desh Deshpande, chairman, Tejas Networks.
The fund will invite proposals to select a few consortia, pre-dominantly of Indian-origin scientists and technologists, for providing funding.
It will provide 85% of the equity without management control and the remaining 15% as sweat equity. Sweat equity is the ownership interest, or increase in value, that is created as a direct result of hard work by the owners.
If the start-up becomes successful, the fund will take more than 51% stake in the venture to ensure that multinationals do not take over the company. In case the start-up fails, the fund provided as equity (85%) would be written off.
The NMCC has also proposed to set up a Telecom Innovation Industry Promotion Council on the lines of the Biotechnology Industry Research Assistance Council (BIRAC) to manage R&D fund for telecom products. This could be tied up with the National Innovation Council administering Rs 500-crore India Inclusive Innovation Fund.