Startups urge DoT not to discontinue telecom R&D finance scheme

Telecom

Startups have urged the government not to stop the Digital Communication Innovation Square (DCIS) scheme midway as it would hamper their ongoing research and development (R&D) work around telecom innovation.

DCIS, which came into effect in 2021, was the first scheme providing R&D funding support for domestic design-led telecom in the private sector. It supports research, development, product design, and intellectual property (IP) creation in the telecom space.

The Department of Telecommunications (DoT) did not release grants in the last six months to certain companies despite reaching the relevant milestones and now plans to close down the scheme.

“If the DCIS support is stopped, it may kill our R&D initiatives for all time. We request that the scheme must not be discontinued midway, as product development activities of more than 50 companies will be negatively hit and companies will feel disheartened and discouraged from working on government-led R&D schemes in future,” Voice of Indian Communication Technology Enterprises (VoICE) said in the letter on May 1 to telecom secretary Neeraj Mittal.

Moneycontrol has a copy of the letter.

VoICE represents companies like Tejas Networks, Sterlite Technologies Limited, HFCL, and Tata Consultancy Services (TCS) and smaller companies like Inventum, Infinity Labs, Lekha Wireless, Nivetti Systems, Amantya, Astrome and Priyaraja Electronics.

The scheme had 66 startup beneficiaries, which included domestic telecom solutions providers such as Astrome, Lekha Wireless, Coral Telecom, Amantya Technologies, Signaltron, and Resonous in the financial year ended March.

“This support should be sustained for worthwhile results as R&D in telecom has long gestation periods and resources if hired and trained must be sustained for a reasonably long period of time. If the DoT stops the R&D support through DCIS, we are afraid that it would be impossible to retain the R&D expertise that domestic stakeholders have nurtured over the last few months and the resource pool would never be at the earlier levels,” it added.

Under the scheme, the government was funding of up to Rs 50 lakh for startups and Rs 2 crore for micro, small and medium enterprises, which could go up to Rs 10 crore based on the project.

As per the scheme documents, it had a budgetary outlay of Rs 124 crore, and Telecom Centres of Excellence (TCOE) India was the implementing agency.

According to the DCIS website, in FY24, the approved grant amounted to Rs 47 crore, with Rs 19 crore released. In FY23, the approved grant was Rs 51.5 crore, with Rs 36.2 crore released. In FY22, startup beneficiaries received grants worth Rs 6.6 crore from the government under the scheme.

Funding from DCIS helped revitalise development activities in several companies whose design efforts would have otherwise faded into oblivion, the representative body said in the letter, adding that the scheme has built some momentum in the last two years.

One of the reasons the DoT is contemplating closure and withholding pending grants is that some MSMEs and startups have become profitable. The body, however, said there are better ways to evaluate the future of this scheme.

“The balance sheet may show profits since R&D investments are typically capitalised and not expensed but these so-called profitable organisations may be challenged on the cash flow. In many cases, where MSMEs are aggressive on R&D, balance sheets may show that R&D investments far exceed the profits made by the company. As a result of this, cash flows could be negative and to bridge that gap, companies may have borrowed from banks. In such situations withdrawal of support to R&D may be the last nail in their coffin,” the letter read.

Some startups said they have been waiting for a tranche release for the last six months.

Rakesh Bhatnagar, director general, of Voice of Indian Communication Technology Enterprises (VoICE) told Moneycontrol that after the letter, the telecom department assured support to startups but said that the form of the scheme may change.

The government is expected to decide on this matter after discussions, aiming to involve more companies.

The recent budget had referred to Rs 1,00,000 crore long-term R&D funding covering all sectors. The amount will be used to fund research, with interest-free loans for 50 years.

"When new Schemes on a much bigger scale are likely to be announced, at least the existing DCIS scheme should be allowed to continue and even strengthened. If India has to attain Global leadership in new technology
segments, schemes like DCIS should not only continue but be made more powerful," the body said in the letter.