Tuesday, December 6 2005 15:06 Hrs (IST) - World Time -

Bangalore: National Association of Software and Service Companies (NASSCOM) is nudging the Government to give loans to software product start-ups to cover high cost of patenting, and fiscal incentives for angel investors to push this space to the next level.

NASSCOM President Kiran Karnik said the industry body has suggested to the Government to provide loans to product companies who have filed for patent.

If the companies succeed in getting patent, the loan can be converted into grants; if not, the amount is repayable. NASSCOM has suggested to the Government to work out some system along these lines, according to him.

As a fiscal incentive to angel investors, Government can work out a mechanism by which if a product fails, then it (Government) would reimburse 60 per cent of the money invested by the angel investor in its development.

Karnik told reporters on the sidelines of a 'Product Summit 2005' here that NASSCOM's suggestions have evoked a 'positive reaction' from the Government, and expressed hope that the Government would make announcements in the coming Union budget.

He said the Government may not have to spend more than Rs 100 crore for giving support to product start-ups for filing global patents.

According to CEO, i-Flex Solutions, Deepak Ghaisas, who also chairs the NASSCOM Product Forum, costs for filing global patent whether it's successful or not is US$ 25,000 toUS$ 30,000 which is big money for small and medium firms.

While India has emerged as a major player in software services and development activity, generating a US$ 17.2 billion in exports in 2004-05, Indian companies developing software products have a minuscule 0.2 per cent share of the US$ 180 billion global market for software products, according to NASSCOM data.

Prof. T R Madanmohan of Indian Institute of Management Bangalore said there has been a spurt in the number of Indian software product companies in recent years.

"While in 1999 there were just 16 companies in the product space, the figure has gone up to 250 last year, but many of these are not registered. As per a sample study, only less than 16 per cent of Indian software product companies went in for patenting even if most of them had cutting edge intellectual property," he said.

"Product companies are unfortunately not darlings of the financial world", said Prof. Madanmohan.

"But they are going to be innovation engines on which India will build its intellectual capital tomorrow," he added.

According to him, revenues of Indian software product companies were close to Rs 800 crore in 1999 and this year, it's going to be Rs 1,860 crore.

"It's projected to grow to Rs 2,500 crore by 2008 and Rs 3,500 crore by 2010," he said.

Karnik, Ghaisas and Madanmohan stressed the need for facilitation of angel investment and seed funding and creating a robust ecosystem for giving a push to this space.