On being questioned by a Parliamentary Standing Committee on Commerce for the poor utilisation of funds for Startup India Scheme 2017-18, Department of Industrial Policy and Promotion (DIPP) has put the onus on Small Industries Development Bank of India (SIDBI) for the slow pace of disbursement to startups, as per media reports.
DIPP has been reportedly asking SIDBI for the past one year to consider steps imperative to increase off-take of funds. It has asked SIDBI to take necessary actions like that of bringing about a change in the manner funds are disbursed so that the funds are disbursed at much faster pace.
According to a senior government official cited in the report,
“For the past one year, in all the meetings of the monitoring committee for the Startup India scheme, we have been asking SIDBI to consider taking steps that can increase offtake of funds. The previous monitoring committee meeting took place on December 4 last year where it was suggested that SIDBI should consider changing the manner and methods in which they are disbursing the amount under the scheme so that a greater offtake can take place.”
Initially, it was reported on March 31, 2017, that only Rs 33.63 crore was disbursed to 62 startups. DIPP then expressed that there’s an improvement in the allocation and disbursement, and on April this year, it said that this year SIDBI has committed Rs 1,136 crore to 25 venture capital (VC) funds, who, in turn, have invested Rs 569 crore in 120 startups.
The official claimed that a significant amount of disbursement to startups has been done in the past couple of months after feedback was taken from VC funds on lower offtake. The DIPP has set targets to facilitate and support 1000 startups by March 2019.
Background
Earlier this month, a report by a Parliamentary Standing Committee on Commerce pointed out that DIPP had utilised only Rs 4 lakh of the Rs 10 crore that was allocated to it for the promotion of Startup India scheme in 2017-18. Before this, it was reported that on Feb 6, only 99 startups have been funded as compared with a total of 6,981 startups recognised by the DIPP.
The Parliamentary Standing Committee on Commerce expressed concerns about the “huge gap” that exists between the number of startups that have received funding and tax exemptions and the number of startups that have been officially recognised.
Asking the DIPP to furnish reasons for the lag in funding recognised startups, the committee suggested DIPP to “take concerted measures to ensure genuine entrepreneurs are provided all the support to flourish and create jobs”.
Also, a meeting held in December last year by Startup India scheme’s monitoring committee stated that DIPP expressed concern at the under-utilisation and slow pace of disbursement of funds. The minutes of the meeting of the monitoring committee also mentioned that “DIPP asked SIDBI to highlight challenges and consider steps (change in the manner of utilization) that could be taken to allow greater offtake of funds.”
This is not the first time when inefficacy of StartUp India scheme has been revealed, where it was seen that the much-hyped initiative is not yielding the desired outcome as promised three years back when it was announced by Prime Minister Narendra Modi in August 2015. The scheme intended to develop an ecosystem to foster entrepreneurship across the country, through income tax benefits, easy bank financing, and lesser compliance burden.
The Startup India campaign has recently completed 2 years of its launch this January. As per the latest report, some 5,350 startups have been recognized in the country with over 40,000 employees working in these startups. The report claimed that the agency that was designated by the Centre to disburse funds to startups has released only Rs 337 crore out of Rs 600 crore to only 75 startups in 2 years.
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