Research & Development (R&D) helps in innovating and developing new technology and knowledge, which leads to an increase in productivity and economic growth globally in the long run. Tamil Nadu is a manufacturing hub, the R&D is mainly driven by the need of an industry. It is ranked among the top 3 states in India for R&D innovation and first in human capital by India Innovation Index. It is one of the few states which has more female researchers than male and accounts for 9% share, the second highest state for R&D expenditure in the country.
Need & Scope of R&D Policies in Tamil Nadu
Tamil Nadu’s economy to boost USD 1 Trillion by end of this decade. This massive goal, although comforted by the finance minister as an achievable one, requires a lot of investment in research and development. Research and development is the stem of most thriving economies. It is therefore a natural trajectory that Tamil Nadu may choose to take and invest more in R&D. Other factors that encourage R&D in TN are to increase the value chain and capitalise the economic opportunities created by the manufacturing sector. To create a better competitive ecosystem for R&D nationally and globally along with increasing the job opportunities for more scientists. A comprehensive approach is required to encourage more R&D services in the state. This approach will concentrate on shifting from a compartmental economy to a unified economy driven by the manufacturing and services sector.
Key Objectives
The main objective of the new Tamil Nadu R&D Policy 2022 is to transform Tamil Nadu into a knowledge-based economy and increase private sector R&D expenditure by 2030. In a broader sense, it will increase the inputs including the appointment of new researchers and scientists in both government and private sectors and output for innovation such as patents and publications. Highlighting the benefits for the development side, it will be used for creating an ecosystem of research parks, research centres and innovation hubs. The policy promotes R&D in the private sector by targeting the existing R&D performing firms in both the manufacturing and service sectors.
The main reason for boosting private R&D is because it will increase the competitiveness of their products and services and innovation is inherent to their growth. These reasons will support the business initiatives to establish and expand R&D Centres, General Capability Centres (GCCs) through various incentives.
Eligibility Criteria
The GCCs and R&D firms should fulfil the following eligibility criteria for receiving the incentive, i) must have a minimum of Rs 50 Crores(INR) in fixed assets for a period of 4 years and having at least 50 people in employment, ii) Clearly demarcated facilities in or outside the Projects and iii) must use R&D products in Tamil Nadu. Another eligibility criteria for receiving a special package incentive states that investment made from 1st April 2022 will be considered for availing incentives.
Fiscal Incentives
The special package incentives can be claimed for the following;
- Land Cost Incentive: R&D projects shall be given 50% of the cost of purchase or lease of land for upto 20 acre, with Rs 5 million/acre. This can also be used as reimbursement after starting the project
- R&D Training Incentive: Training incentive can be availed for 12 months for Rs 10,000 per person per month for the residents of Tamil Nadu. The employees should be engaged in core R&D and have qualifications in technology/sciences and a work experience of 7 years, or a post-graduate degree in technology/sciences and a work experience of 5 years, or a doctorate in sciences/technology.
- Quality Certification Incentive: Projects obtaining quality certification (ISO, ISI, BIS, FPO, BEE, AGMARK) or any other national/international certificates will be claiming a subsidy of 50% of the total cost incurred for obtaining the certification and limited to Rs 10 million for the period of investment.
- Intellectual Property Incentive: Reimbursement of 50% of expenditure to maximum of Rs 10 million can be claimed as in-house R&D for intellectual property and upto Rs 5 crore for standalone R&D assets.
- Standard Incentive: Another eligibility for standard incentive will be electricity tax exemption for 5 years, stamp duty exemption, and green industry incentives of up to Rs. 10 million. In house R&D will not be eligible for this incentive because this is applicable for industrial units.
- SGST Refund: The R&D project can also claim SGST refund on capital goods.
Additional incentives will include
- Special Capital subsidy: This incentive states that the R&D firms and GCCs rely on imports of specialized equipment which is used for R&D activities. A special capital subsidy is provided for the above quality research which includes 25% on Eligible Fixed asset (EFA)and shall be distributed in equal instalments of over 10 years from the date of purchase of land, machinery and equipment, or Rs. 25 million, whichever is lesser.
- Innovation lab Incentive: Innovation labs can claim 50% of the EFA as a reimbursement up to Rs 10 million provided the labs are accredited as per NABL, ISO certified.
- License Cost Incentive: The cost incurred on proprietary software license is one of the major expenditures for R&D firms and GCCs. Hence 50% of the expenditure on purchase of specialized software license within 4 years of the investment period is subject to Rs 2.5 million.
- Product testing and prototyping Incentive: Prototyping stage is very crucial which helps in identifying errors before commercialization. Hence R&D centres and GCCs are provided with 25% of the EFA, subject to a ceiling of Rs 10 million.
- Startups Incentives: Tamil Nadu startup and Innovation Mission (TANSIM) has a target to establish 10,000 start-ups in TN by 2026. Hence a grant of Rs 1 million is offered to start-ups.
Governing Bodies
The Tamil Nadu R&D Policy 2022 will be governed by Tamil Nadu R&D mission, a Section 8 company established by the Government of Tamil Nadu. They will act as a facilitator in enabling interactions between academia and industry for building necessary linkages. R&D mission will also assist the Government of Tamil Nadu in R&D procurement programmes and also in monitoring and evaluating the impact of R&D projects in the state. It will create a framework for monitoring and tracking the innovation and R&D activities in the state. They also act as implementing agencies for the policy. Tamil Nadu Industrial Policy, 2021 serves as a recommendatory body to the Cabinet for sanction of incentives and SIPCOT shall be the disbursal agency for all incentives. Operational guidelines and clarification may be issued from time to time.
Destination of FDIs
The Tamil Nadu R&D Policy 2022 is expected to boost Tamil Nadu’s image as a interesting destination for many FDIs as well. Tamil Nadu is a top investment destination in India for many FDIs due to the advanced infrastructure and location advantages that it brings. The FDI in R&D will also enhance the quality of R&D investment and promote innovations. The design, development and testing component in R&D will make the foreign products suitable to the Indian environment. According to an investment location comparison tool, Chennai emerged as the economical location for electronic R&D, with an estimated annual operating costs of $1.24 million for a 50-person R&D centre. The doubling of R&D expenditure policy in Tamil Nadu will increase innovations and research which indeed will attract many foreign investments.
Reference : Policy Document
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About the Author:
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Yesyeswini Sarma
An India Market Entry Associate, assisting foreign companies in their Indian market entry with our Pre entry and Setting up services. She acts as a Key account manager in setting up services of greenfield manufacturing companies. |
