Underlining that its newly created fund to support deep tech companies had adequate safeguards to deal with conflict-of-interest situations, the government Friday said that in the second cohort of firms selected, there was just one of 13 in which a selection committee member had a stake.
The government also said that there were no immediate plans to have a review of the entire process but if any “strengthening” is required, it will be addressed as per the fund’s governance structure.
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Of the 22 companies selected, 15 were those in which members of the selection committee had an interest. The report mentioned that the members did declare their interest in advance, and recused themselves from the evaluation process of the concerned companies.
The high share of beneficiaries tied to the panel has raised concerns over the adequacy of the safeguards in place, considering that public money worth Rs 1 lakh crore is at stake.
“There are no immediate plans to further strengthen the process… The governance structure of the RDI Fund is such that there is an Executive Council chaired by the Principal Scientific Advisor to the Government, and an Empowered Group of Secretaries headed by the Cabinet Secretary. If any further strengthening of the processes is required, these two bodies will deliberate and take action. At the moment, there is no such plan,” said Shivkumar Kalyanaraman, chief executive officer of the Anusandhan National Research Foundation (ANRF), a statutory body under the Ministry of Science and Technology, which is the custodian of the RDI Fund.
Meanwhile, Congress MP Praveen Chakravarty, who had flagged this issue in the Rajya Sabha, has asked the government to inform Parliament about the “safeguards in place to prevent actual, or perceived conflicts of interest” in the selection of companies for loans from this Fund. He submitted a notice of intention calling the attention of the Minister of Science, Dr Jitendra Singh to a motion likely to be tabled on August 13.
The Congress leader also asked the government to inform the House whether an independent review of the first round of approvals will be undertaken, and whether protocols to avoid potential conflicts of interest would be strengthened through enhanced disclosure, transparency and independent oversight mechanisms.
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The RDI Fund seeks to provide low-cost long-term loans to private sector companies engaged in research and development in advanced transformative technologies. The selection of companies and disbursal of loans is currently being done through two existing entities under the Ministry of Science and Technology — the Technology Development Board (TDB) and the Biotechnology Industry Research Assistance Council (BIRAC). The first round of funding went to companies selected by TDB.
TDB Secretary Rajesh Kumar Pathak said the guidelines on conflict of interest were already stricter than the prevailing norms in the private sector, and went beyond mere declaration and recusal.
Pathak said the first round of applications had a disproportionately large number of applicants with links to members of the selection committee.
“This might be because these companies were among the first to become aware of the RDI Fund, and applied early. And since the appraisals are happening on a first come first serve basis, the first cohort gives the impression that most of the applicants are linked to selection committee members. But that is not the case. We have already finalised the second cohort, which is to be finally approved on August 11. Thirteen companies have been recommended in this second round, and there is only one company in which any selection committee member had a stake,” Pathak said.
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Pathak flagged the guardrails in place. “For example, companies in which the selection committee members have any operational role, or they have founded or own that company, those companies are not even eligible to apply, even if they are very competent otherwise. Similarly, companies in which the selection committee members have more than 10 per cent stake are automatically disqualified,” Pathak said.
“Then there is this concept of super-majority that we apply during the selection process. So if there are 11 members who are selecting, the selection doesn’t happen with a simple 6-5 majority. It requires a 8-3 majority to get selected. If fewer members are present, this equation changes, but a minimum of two-thirds majority is ensured. This ensures that even if two or three members have doubts over the company, it does not get selected,” he said.
“So, if the question is whether there are additional guardrails within the system to deal with conflict of interest, these are additional safeguards. And there are more such provisions. The selected company gets only 50 per cent of its project cost from the RDI Fund. The remaining 50 per cent is to be raised from the market. Now, if the company raises money from a market fund in which the government, let’s say, has a 50 per cent stake, then that means that company has raised only 25 per cent of its project cost from the market. So, the RDI Fund then releases only a matching amount. The idea is to keep the exposure of the government money to maximum of 50 per cent. Also, the selection committee members have to disclose not just positive interest but also negative interest. If they have any stake in a company that is a direct rival of one of the applicants, even that has to be disclosed,” he said.
Pathak said every attempt had been made to keep the system as fair as possible, and avoid any situation which could be considered favouritism.
“The RDI Fund is new but the TDB has been supporting private sector technologies for 30 years now. We have provided funds to more than 400 different projects in the private sector, and our expert panels have routinely been comprised of outside experts. Conflict of interest is something that we take very seriously,” he said.
Pathak said the selection panel, in any case, had only recommendatory powers.
“The final approval is granted by the TDB Board where seven government officials (Secretaries of Department of Science and Technology, Defence Research and Development Organisation, Department for Promotion of Industry and Internal Trade, Department of Scientific and Industrial Research, Rural Development, Department of Expenditure, and Secretary of TDB) are members, apart from four outside experts. This ensures a second round of checks,” he said.
The high share of beneficiaries tied to the panel has raised concerns over the adequacy of the safeguards in place, considering that public money worth Rs 1 lakh crore is at stake.
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