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Startup Fund of Funds: DIPP Unhappy with SIDBI For Slow Pace of Disbursement

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Earlier this month, a report by a Parliamentary Standing Committee on Commerce said that the Department of Industrial Policy and Promotion (DIPP) could utilize only 0.4% of Rs 10 crore that were allocated to it for the promotion of StartUp India scheme in 2017-18. Prior to 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.

Now, as the committee’s report questioned DIPP for this poor utilization of funds, DIPP in turn is now blaming Small Industries Development Bank of India (SIDBI) for slow pace of disbursement to startups.

According to Indian Express report — citing a government official, DIPP has been repeatedly asking SIDBI for the past one year to consider steps imperative to increase off-take of funds. DIPP has asked SIDBI to take necessary actions such as 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.”

At first — 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.

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“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”, added the official.

However, last month, 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”.

Moreover, 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 committee also 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.

The minutes of 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.”

Notably, this is not the first time when inefficacy of StartUp India scheme has been revealed, where it was again observed 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 to develop an ecosystem to galvanize entrepreneurship across the country, through income tax benefits, easy bank financing and lesser compliance burden.

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The Start-Up India campaign has recently completed 2 years of its launch on January 16, 2018. According to the latest report, (till 28 February 2018) some 5,350 startups have been recognized in the country with over 40,000 employees working in these startups. Surprisingly, the report said that th worst is 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 start-ups in 2 years.

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