Deeptech policy draft shows the way forward

The past two weeks must have been very busy for you if you are an analyst or an observer of the Indian deeptech sector. On August 1, New Delhi released a draft policy aimed at shoring up the fledgling sector. This paper covers everything from funding, intellectual property protection, infrastructure, and conducive regulations.

Then came the bombshells. First, India announced that it was restricting the import of laptops, tablets, and servers with immediate effect, only to rescind it the next day and state that it would take effect after three months.

Following that, a Reuters report revealed that New Delhi has imposed restrictions on drone components from countries “sharing land borders with India”, effectively banning Chinese manufacturers. Given that 70 percent of such components used by Indian drone makers come from China, the impact of this is bound to be significant.

India appears to be growing concerned about its reliance on imports for a wide range of deeptech products. The draft policy paper presents a series of recommendations to address this situation. It was formulated by the National Consortium and Working Group, established by the Prime Minister's Science, Technology, and Innovation Advisory Council.

This comprehensive document provides an in-depth assessment of the Indian deeptech landscape, highlighting the challenges faced by the sector and outlining the necessary steps to be taken.

The paper, crafted with insights from over 200 stakeholders, commends Kerala for its proactive policies in fostering startups. It particularly praises the state’s practice of procuring directly from startups as a beneficial strategy for nurturing deeptech enterprises. “Relaxations in tender fee, earnest money deposit, prior experience, and turnover have been permitted as part of the relaxation for startups participating in public tenders,” it notes.

Another interesting point for the state is one of the measures envisaged to enhance India’s spacetech sector. It says that efforts are underway to establish a pool of experts who have retired from ISRO, aiming to provide technological support to startups. The state government's Space Park initiative aligns with this goal, especially considering that Trivandrum is home to a significant portion of these experts.

The draft policy also acknowledges the implementation of tariff and non-tariff measures by the central government aimed at promoting domestic production. However, it suggests that “considering the global distribution of value chains, a comprehensive analytical study should be conducted to assess the impact of trade barriers on startups. This study should determine whether a more liberal trade regime would better facilitate the growth of domestic industry and technology development”.

The recent ban on drone components from China shows the necessity of such an analysis. According to Reuters, which initially reported on the ban, the decision was primarily driven by security concerns expressed by the defence forces.

Drones are becoming integral to the arsenals of various militaries worldwide. The vulnerability of Chinese-made products to security breaches was the driving force behind the United States’ decision in 2019 to restrict the Pentagon from procuring or employing drones and components manufactured in China.

However, India faces a challenge due to the fact that 70 percent of drone parts and their supply chains trace back to China. As a result, the domestic industry now needs to seek components from other countries, incurring higher costs and potentially impacting demand.

“If I were to purchase equipment from China today with the intention of manufacturing it in India, the cost would rise by 50 percent,” a senior defence official told Reuters. “As a nation, we must be prepared to support the growth of our domestic ecosystem.”

However, even if this sentiment gains traction, the challenge of excluding Chinese components remains daunting due to its substantial influence in the global drone market. According to the South China Morning Post, DJI Technology Company, a Chinese firm, manufactures eight out of every ten non-military drones used worldwide.

The city of Shenzhen, where DJI is headquartered, has earned the moniker “drone capital of the world”. This is due to the presence of 600 drone manufacturers in the city and a thriving supply chain comprising thousands of establishments. The majority of drone makers across the world depend on this supply chain.

The rise of the drone industry in Shenzhen can be attributed to policies put in place by city authorities in 2003 to foster the sector, bringing together the private sector, defence forces, and local government.

Beijing further boosted the industry by designating it as a priority sector two years later, recognising its applications in agriculture and boosting domestic demand for drones. Two decades later, India's deeptech draft policy is trying to follow a similar path.

Considering China’s extensive dominance in the global drone sector, India’s decision to ban Chinese drone components could potentially lead to a practice known as white labelling. This involves companies from other countries importing such parts and then rebranding them as locally manufactured, catering to the Indian demand.

Detecting and addressing such practices would be challenging and time-consuming. Additionally, given that suppliers in other countries also rely on the Chinese supply chain, it would be arduous for Indian companies to request the exclusion of these components without incurring a substantial markup in price.

With a lack of an effective supply chain that provides crucial components, fostering deeptech startups faces significant hurdles. Even in other sectors of deeptech, such as microprocessors, where China doesn’t hold a major role, India is encountering difficulty in making progress.

Despite unveiling an appealing 10-billion-US dollar incentive in 2021, India’s efforts to attract major chip makers to establish operations in the country didn’t yield concrete results.

Now, India has successfully attracted the American chip maker Micron to establish a factory in the Sanand industrial area of Gujarat. However, this achievement came with the condition that India would contribute 70 percent of the capital expenditure.

A brilliant article by Pratap Vikram Singh on The Ken website (may require a subscription) describes the behind-the-scenes manoeuvres that unfolded in both New Delhi and Washington, ultimately culminating in this deal.

India yielded to their demands by augmenting its financial involvement, ensuring an airtight tax benefit clause, and promising incentives to key component manufacturers who were willing to establish factories in India before Micron signed on the dotted line. If all progresses as planned, Micron aims to commence production at the Indian facility by January 26 next year, coinciding with Republic Day celebrations.

Given the extent to which New Delhi had to go to achieve this, it becomes imperative for the country to achieve self-reliance in the deeptech sector. But it needs a political leadership with a clear vision and strong political determination that extends beyond mere photo opportunities.

While the draft policy lays out well-defined long-term reforms, the question is whether those in power will follow its recommendations in full, given the political system’s vision is on five-year election cycles.

Conclave season goes into high gear

It seems that Kerala’s conclave season is in full swing, with a multitude of conferences taking place in the capital. Last week, Kerala Agricultural University hosted a five-day biotechnology conference called BioZion, while cardiologists and urologists held their own summits in the city. The Kerala government-backed Freedom Fest began on Saturday, featuring experts from diverse fields participating in the four-day event. Next month will see the first-ever Global Travel Mart at the Greenfield Stadium while government says it is planning a mega event for shipping firms next month ahead of the Vizhinjam Port inauguration. Kerala Startup Mission, meanwhile, has announced that the next Huddle Global will take place from November 16 to 18.

During the Freedom Fest, Dr Murali Thummarukudi, the director of the G20 Global Initiative Coordination Office, highlighted a key aspect of these conclaves that bring together thought leaders. While speaking during a panel discussion, he noted that panel members were typically individuals with silver hair, even though the topics discussed pertained to shaping the future. He raises an important question: Why aren't more young individuals included in such events, considering they are the actual stakeholders?

Electrifying growth of Kerala startup

Despite a lukewarm attitude towards electric vehicle sector from both the central and the state governments, the startups in the field have been racing ahead in Kerala. A prime example is ChargeMOD started by Calicut Engineering college products Ramanunni M, Anoop V, Advaith C, Chris Thomas, Mithun Krishnan and Visakh V Raj. Their company has now over 2,000 charging stations and holds more than 90 percent of the market share in Kerala. Their record has impressed Phoenix Angels who have backed them with 2.5 crore rupees as pre-seed investment. The company has set a targeted projection of 10 crore rupees for the current fiscal and Ramanunni told the New Indian Express that the startup already has purchase orders worth about 4.5 crore rupees.

Weight loss drug to protect heart

The anti-obesity drug Wegovy, developed by Danish pharmaceutical company Novo Nordisk, has been causing quite a sensation in the United States, with people of all ages clamouring for it. Now, a new study indicates that the drug provides robust protection against serious heart problems, prompting some medical experts to suggest that this could potentially reshape the treatment landscape for heart ailments in the future. The full data from the study will be released later this year. But the company says findings from a five-year trial involving 17,604 participants indicate that the drug can reduce the risk of cardiovascular events by 20 percent. A report in The Nature magazine highlights that these results also imply that the next generation of anti-obesity drugs can have a profound positive impact on health, beyond merely reducing weight.

It’s all going to the ruins now

Reports regarding the planned cage fight between Elon Musk and Mark Zuckerberg are taking a stranger turn. The latest buzz suggests that the event is now slated to take place at the ancient 2,000-year-old Colosseum in Rome. And to add an extra layer of eccentricity, Dana White, the president of the Ultimate Fighting Championship, has also entered the scene, positioning himself as a potential host for the event. White believes that the fight would be a major draw. “Who wouldn't want to watch that fight? It’s the sort of match even your grandmother would tune in for. To surpass that, you’d need a battle between Trump and Putin.”

We are giving this whole affair a big thumbs down.