PM’s science panel urges mandatory R&D funding

The Prime Minister’s Science Technology and Innovation Advisory Council (PM-STIAC) has recommended making it mandatory for medium and large enterprises in key sectors to set aside funds for research and development (R&D).

The council expressed at the extremely poor level of R&D investment which has remained stagnant at 0.35 percent in the private sector and 0.6-0.7 percent of the country’s GDP for 20 years.

The council has urged both the private and public sectors to improve this deplorable state of affairs and recommended a spending of at least one percent of their income on R&D for the private and two percent for the public sector by 2022. The global average R&D spending is 1.5% of GDP, which is the overall level that the council wants to see in India over the next five years.

The council has suggested that line ministries be mandated to allocate at least 2% of their budgets as research and innovation grants for developing and deploying technologies related to priority concerns.

The council discussed the issue in detail at its first meeting on October 9 at which it also deliberated over a mandatory investment model proposed by the Confederation of Indian Industry (CII). The lobby group had suggested that the pharmaceuticals and biotechnology industries should be mandated to set aside eight percent of turnover for R&D, citing a global average of 15%.

For automobiles, it has suggested three percent of turnover, two percent for technology hardware and equipment, five percent for software and computer services, two percent for electronic and electrical equipment, one percent each for industrial engineering, chemicals and general industrials and 0.55% for oil and gas sector.

Among the few companies that have exceeded the threshold in their respective sectors, according to CII data, are Dr Reddy’s Laboratories, Cadila Healthcare and Cipla, among others.

Loss-making companies may be exempted from mandatory R&D investments. During economic downturns, the panel suggested a three-year average to calculate the minimum R&D investment for a particular year. The council also said that R&D investment should be calculated at the level of each industry rather than at group level with each sector disclosing this through audits and self-declarations.

The council proposed a 100% tax holiday for products emerging out of R&D for the first five years of commercialisation, provided they are patented or pending patent application, to incentivise industry.

The office of principal scientific adviser Vijay Raghavan has deplored the finance ministry’s plan to withdraw weighted R&D tax deduction provisions from April 1, 2020, saying this would potentially slow indigenisation and retard new product generation.

The council observed that while R&D investment may not in itself be a metric for innovation, there is little scope for this in absence of funding. The council has proposed the setting up of an Advanced Mission Mode Innovation and Research (ADMIRE) at line ministries to provide direct R&D grants to industry on a 50-50 model through competitive bidding.

Observing the low contribution of states to R&D, the PMSTIAC suggested they partner with the Centre to jointly fund research and innovation programmes through centrally sponsored schemes.

The panel has also pushed for an amendment in corporate social responsibility (CSR) rules to allow contributions to publicly funded universities and institutes, national laboratories and autonomous bodies. The principal scientific adviser’s office is learnt to have received unanimous support on the issue from various ministries. The panel has strongly advocated a twofold increase in the central allocation to scientific departments along with a nimbler grant dispensation process and flexibility in grant utilisation.