The Finance Minister has proposed the setting up of blended capital thematic funds in the 'sunrise' sectors of climate action, agriculture and deep technology sectors.
“For encouraging important sunrise sectors such as climate action, deep-tech, digital economy, pharma and agri-tech, the government will promote thematic funds for blended finance with the government share being limited to 20% and the funds being managed by private fund managers,” the FM Nirmala Sitharaman said in her budget 2022-23 speech on Tuesday.
The new funds is expected to be modelled after the fund-of-funds set up by National Investment and Infrastructure Fund and Small Industries Development Bank of India. "The budget aims to expand funding for start ups by sponsoring more fund-of-funds. This path breaking move will help onshore our offshore private equity and venture capital industry and provide a boost to start ups as each Fof will in turn fund between 150-200 start ups," Gopal Jain, Managing Partner, Gaja Capital said.
Blended finance is meant to use development capital to mobilise additional commercial funding towards sustainable development.
In addition, the FM has proposed raising a fund routed through NABARD (National Bank for Agriculture and Rural Development) under a co-investment model to finance startups in the agriculture space. NABARD is the government's apex regulatory and financial institution to support agriculture and rural development.
“This is to finance startups for agriculture and rural enterprise, relevant for farm produce value chain. The activities for these startups will include, inter alia, support for FPOs (farmers producers organisations), machinery for farmers on rental basis at farm level, and technology including IT-based support,” Sitharaman proposed on Tuesday.
"Such funds being managed by private fund managers can act as a fund of funds and provide much needed capital boost to the fast-growing domestic AIF (alternative investment fund) industry," Tejesh Chitlangi Senior Partner at IC Universe Legal, said.
Sitharaman pointed out that so far government-backed Funds NIIF (National Investment and Infrastructure Fund) and SIDBI (Small Industries Development Bank of India) Fund of Funds have provided scale capital that has created a multiplier effect.
Additionally, startups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-as-a-Service (Dr-aaS) and the required courses for skilling will also be started.
Early this week, the ministry of agriculture and farmers welfare amended the guidelines of the sub mission on agricultural mechanisation to promote use of drones in agriculture.