Indian government is setting up a $1 billion venture capital fund (Rs 6,200 crore) to encourage manufacturing of telecom equipment and devices, reports Hindu Business Line.

The plan has been floated by National Manufacturing Competitiveness Council (NMCC) and it will soon be sent to Prime Minister Manmohan Singh for approval. According to the report, NMCC also plans to rope in Vinod Khosla, Sam Pitroda and Gururaj Deshpande to be part of the investment committee of the proposed fund, that will focus on technology innovation and not return on capital.

The promoter of the company will have full control of management, subject to a review by the expert committee. However, the fund will maintain an equity holding above 51% to prevent any foreign entity from gaining control over the firm.

Fear of the videsi haath (foreign hand)

One point that sticks out in the whole proposal is the insistence that the fund set up by the government will have equity control of more than 51% in these companies to avoid acquisition by a foreign company, which is quite bizarre in 2014. Such a policy would have made sense in early 90s when India was still getting used to being part of a global economy. Such a policy makes sense in the case of highly sensitive technology such as the one used by military or for nuclear research, but for telecom equipment? Seriously?

Redundant policy?

This proposal needs to be integrated into the National Electronics Policy that the government had rolled out in 2012, to encourage domestic companies to start manufacturing electronics goods within the country instead of importing them. As part of the first stage of this process, India had already started manufacturing set-top boxes domestically rather than importing them. Tablets and smartphones are supposed to be next in line for domestic manufacturing as per the policy. Indian mobile manufacturer Micromax had announced in November last year that it will start manufacturing phones in India, but it’s not clear if it took such a decision because of this policy.

There has also been some work around the infrastructure that is needed for manufacturing electronic devices. The Cabinet had approved the setting up of two semiconductor wafer fabrication units at a cost of Rs 63,412 crore in India, earlier this year.

The government had even proposed various incentives for companies that invested in electronics manufacturing in India under the Modified Special Incentive Package (M-SIPS). Following which, it had received proposals worth Rs 65,000 crore for manufacturing electronics in the country.

Besides this, the government had also set up a corpus sum of Rs 30,000 crores to set up Electronic Manufacturing Clusters (EMCs) last year. It has received applications from several states and as per DeitY website there are 30 EMCs being set up across 13 states in India. However only the Bangalore facility has got the nod until now and the first brownfield EMC will be set up in Electronic City at a cost of Rs 85.15 crore.

P.S: Dear NMCC, your ‘Hyper Link Policy‘ says that we should inform you when linking to your website. I could not find your Twitter id, so I’ll make it a point to send a post card informing you of the same as soon as I get time, till then please bear with this indiscretion of ours .