New Delhi: Mohan Chandrasekaran’s two-year-old firm AdStringO managed to secure the coveted government approved startup certification but that hasn’t helped smoothen its path to government contracts.
Chandrasekaran has been keen for his image compression software firm to secure business from government projects such as the National Savings Certificates scheme and entities such as the National Securities Depository Ltd.
But the eligibility criteria for participating in government projects prove to be barriers too big for the likes of “Much more than funding, startups need business to survive,” said.
The Prime Minister’s promise under Startup India was that if your product and pricing are good, you can qualify (for government tenders). A couple of times, our proposals got rejected because they were necessarily looking for (companies with)
Among the chief attractions of the Startup India initiative has been its promise to allow selected companies better access to public sector projects with easier procurement norms.
Selection for startup India tough
“In order to promote startups, government shall exempt startups (in the manufacturing sector) from the criteria of ‘prior experience/turnover’ without any relaxation in quality standards or technical parameters,” states a policy document on the Startup India website.
That promise, say startups, hasn’t held true. Government projects mostly are awarded to large companies despite young technology startups offering competitively priced products.
Getting selected for Startup India itself has been a challenge because of its tough eligibility norms, on February 1. In the 12 months since the initiative was launched, in January 2016, only 522 out of about 1,425 applicants have been selected.
Satyabrata Das, deputy general manager-finance at state-owned power utility NTPC Ltd, said startups cannot be cut any slack and would have to fulfill all the qualifying criteria to bid for a project.
“For an order value of Rs 50 lakh, we could require them to have experience of having had prior sales of up to Rs 50 lakh. And for tender values upwards of Rs 50 lakh, startups will have to submit their bank statements,” he said.
That would explain why Phoenix Robotix, a government-certified startup that has built a lowcost pollution monitoring device and holds three patents, has had to partner with larger companies for Smart City projects.
“Most (public sector undertakings) we are talking to are showing interest in our product but it is difficult to go through the tendering process since we won’t be eligible,” said CEO Amiya Kumar Samantaray.
The qualifying criteria required the bidding company’s turnover to be at least double the tender value and for it to have experience of at least three years in selling the specific product, he said.
Another big hurdle, according to startups, is that government departments and public companies are unaware of which firms qualify under Startup India to bid for their projects. NTPC’s Das said the company’s vendor list runs into the thousands and it was not possible to seek out startups for their requirements.
Also, it is up to government-certified startups to approach the company and register with it as a vendor, he said.The Department of Industrial Policy and Promotion, the nodal body for implementation of the Startup India initiative, denies this to be the situation.
“I think there is a need for clarity,” said Ramesh Abhishek, secretary, DIPP.
“Everybody is free to sell to government departments and PSUs. Nobody is excluded because they are startups. What we have promised and what we have done is (ensure) that nobody should be disqualified because they did not have experience… (or) a minimum turnover. However, they have to compete on price and technical requirements.”
Ankit Poddar, CEO of Swadha Energies, is unlikely to agree. The company, a provider of Internet-of-Things-based control technology for air-conditioning systems, won a project for IIT Madras’ 10-lakh sq ft research park two years ago, outcompeting five companies. Yet, government projects remain a distant dream.
“(Government) contractors and project managers still don’t know what startups are,” said Poddar.
“They fear whether startups will be able to execute a certain project or not. Often, among other restrictions such as experience, startups have to fulfill conditions such as submitting a security deposit… That is difficult to fulfill given our cash-flow situations.”
Source: The Economic Times
