Govt. of India’s Department of Industrial, Policy and Promotion (DIPP) has sought Rs 1,600 crore from the finance ministry in the supplementary demand for grants for the Fund-of-Funds (FFS) for start-ups in the current financial year.
Notably, around Rs 500 crore fund of funds is backlog and now DIPP has sought an additional Rs 1,100 crore for the fund-of-funds making it a total of Rs. 1600 crore.
In June 2016, the Union Cabinet has approved setting up of Fund of Funds for Startups (FFS) under Small Industries Development Bank of India (SIDBI) for extending support to Startups.
In the Union Budget for 2017-18, the central government had allocated just Rs 1 lakh crore for the fund-of-funds and had already announced the Rs 10,000-crore ‘Fund of Funds for Startups’ in June 2016. According to the Startup India Action Plan status report March 2017, Rs 500 crore out of Rs 10,000 corpus has been released to SIDBI, who is the fund manager of ‘Fund of Funds for Startups’. The government has so far released Rs 600 crore to SIDBI while the remainder of Rs 10,000 crore will be received in tranches till 2025.
“It’s important to note that the fund-of-funds will be covered in two finance commission cycles (through 2025). So roughly, it comes to around Rs 1,100 crore per year,” a senior official said to Financial Express.
In March, the government approved long-sought-after changes to the conditions for sanctions from the fund-of-funds, which are likely to encourage more investors to tap government funding. The fund-of-funds was sanctioned for contribution to various alternative investment funds (AIFs) registered with the Securities and Exchange Board of India (Sebi). These AIFs were to extend funding support to start-ups and the move was in line with the Startup India Action Plan unveiled by the central government.
Meanwhile, 1,835 start-up applications have been recognized as start-ups by DIPP as of March 9, of which only 10 start-ups have benefited from the government’s decision to give income tax benefits since the launch of the scheme in January 2016.
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