Chief Minister's Startup/Innovation Projects/New Industries Scheme

What is the Chief Minister's Startup/Innovation Projects/New Industries Scheme?

The Chief Minister's Startup/Innovation Projects/New Industries Scheme is a Himachal Pradesh state scheme notified by the Department of Industries on 15 November 2016 under notification number Ind-II(F)12-3/2015. It is commonly called the HP CM Startup Scheme or Mukhya Mantri Startup Yojana. The stated purpose is to turn educated youth in Himachal Pradesh from job seekers into job creators by funding startups and innovation projects and by building an incubation network across the state.

The Chief Minister's Startup Scheme works on three fronts at once. It pays money directly to individual innovators while their idea is still being developed, it funds host institutions to set up incubators that mentor those innovators, and it gives the resulting enterprises a package of industrial incentives: concessional land, cheaper stamp duty, interest subvention and purchase preference: once they start commercial production.

Aims recorded in the guidelines:

• Self-employment, employment generation and income generation.
• Promoting new ideas, products and processes suitable for commercialisation.
• Setting up incubators and incubation centres in the state.
• Handholding new enterprises and entrepreneurs.
• Facilitating adequate investment and venture capital funding for startups.
• Promoting industrial development in Himachal Pradesh.

Who is eligible for the HP Chief Minister's Startup Scheme?

You can apply if:

• You are setting up a startup or new industry, any entity, proprietor, limited company, partnership firm registered under the Indian Partnership Act 1932, or limited liability partnership, proposing a micro or small scale enterprise in the services sector in one of the scheme's focus areas, or in the manufacturing sector in Himachal Pradesh after 31 March 2016.
• You have an innovation project; introducing new technology, or making radical or incremental changes to products, processes and services that result in something new.
• You are a host institution. A reputed technology, management or R&D institute, a university or a private university or engineering college in existence for at least five years as on 31 March 2016, wanting to set up an incubator.

Nine focus areas define the eligible field: technology-driven innovation in any sector; rural infrastructure and facilities, crafts, arts, water and sanitation, renewable energy and healthcare; clean tech; agriculture, horticulture and related areas; food processing; retail; tourism and hospitality; mobile, IT and ITeS including hardware; and biotechnology.

You cannot apply, or are not eligible, if:

• Your enterprise is outside the focus areas and outside the manufacturing sector, or is above the micro and small scale category.
• Your manufacturing unit was set up on or before 31 March 2016, the scheme covers units set up after that date.
• You are seeking the same incentive on the same component under a central government scheme. The guidelines are explicit: the same incentives cannot be availed on the same component under both state and central schemes.
• You are a for-profit body applying as a nodal institute. The application form states that only a non-profit organisation is eligible as a nodal institute under the scheme.

What benefits does the scheme give an innovator?

Support to innovation projects:

• Rs 25,000 per month as sustenance allowance for one year, where the project is recommended by the host institution and approved by the supported Committee.
• Free incubation support: mentoring services and access to the incubation centre's labs and facilities on a free-of-cost basis.
• Marketing and commercialisation assistance of up to Rs 10 lakh to launch the product or service. It is given either to a project that has secured up to 25 per cent funding from a registered angel investor, venture fund or reputed incubator, or as matching assistance to a reputed incubator funding the project as part of an accelerator programme. It may be disbursed as grant, soft loan or equity, case by case.
• Patent cost reimbursement — up to Rs 2 lakh per Indian patent awarded or actual cost, whichever is less, and up to Rs 10 lakh for a foreign patent on a single subject matter. It is paid 75 per cent after filing and 25 per cent after grant, routed through the incubator.
• Travel and stay support for exposure visits: under the procedure effective 1 April 2018, incubatees claim a daily allowance of Rs 500 per day and a staying allowance of Rs 1,500 per day for approved events and exposure visits, reimbursed by the host institution with intimation to the Directorate of Industries.

Incentives once the enterprise is set up:

• Feasibility study or project report cost to 75 per cent of the cost, up to Rs 1,00,000 per case, routed through the support centre.
• Land at concessional rate to 50 per cent of the rates fixed by the Department of Industries, in Category B and C industrial areas.
• Stamp duty at 3 per cent only on conveyance and lease deeds.
• Interest subvention of 5 per cent for three years on loans up to Rs 25 lakh from scheduled nationalised or state cooperative banks, for micro-sector startups with investment up to Rs 25 lakh employing at least five people.
• Pollution board fee concession: consent-to-establish and renewal fees reduced by 25 per cent for green industry and 10 per cent for orange industry.
• Purchase preference, at least 30 per cent of government, board and state corporation procurement placed with local small-scale units at the lowest approved rates where their quote is within 15 per cent of the L-1 rate, with startups exempt from prior experience and turnover conditions if they meet the tender's quality standards.

The tax concessions written into the 2016 notification, including the VAT and CST exemptions and the 80 per cent and 60 per cent fixed-capital-investment ceilings for tribal areas and backward panchayats, were expressly to be recast after GST came into force. Check the current position with the Directorate of Industries before relying on them.

What does the scheme give incubators and host institutions?

• Rs 30 lakh per incubator per year for up to three years as financial assistance for setting up the incubator.
• Up to Rs 10 lakh a year for recurring expenditure, split as Rs 2 lakh for operational expenses such as coordinator salaries, mentoring and hackathons; Rs 2 lakh for faculty and student training; Rs 1 lakh for exposure to support and network programmes; Rs 2 lakh for visits to national and international startup destinations; Rs 2 lakh for internship stipends; and Rs 1 lakh miscellaneous.
• No lease rent or O&M charges for five years where a government building is leased to an incubator, or until it is self-sustainable. For private premises, a rental reimbursement of Rs 5 per sq ft per month or 25 per cent of actual rent, whichever is less, for three years, limited to the incubation space.
• Investment subsidy of 20 per cent of capital expenditure other than land and building for a private-sector incubator that signs an MoU with the state within two years of the scheme's notification, capped at Rs 50 lakh.
• 50 per cent reimbursement of stamp duty and registration fee on sale or lease.
• Allotment of a plot in an industrial area for setting up the incubation facility, as per the prevailing policy.

An incubation fund with an initial corpus of Rs 5 crore backs the scheme, and the HP Centre for Entrepreneurship Development (HPCED) acts as the startup support centre with a need-based grant starting at Rs 1 crore per annum.

How to apply for the HP Chief Minister's Startup Scheme

1. Submit the online application form as a startup or innovator through the state startup portal or the single window portal at emerginghimachal.hp.gov.in.
2. Note the unique number generated on submission. It is the tracking number for the application.
3. Wait for scrutiny. The scrutiny committee of the Department of Industries checks the application first.
4. The application is either reverted to you if rejected, or forwarded to the concerned incubation centre for processing.
5. Approach the incubation centre with your innovative idea or concept for recommendation.
6. The committee approves or rejects the idea within 20 days of a duly recommended individual or group of individuals.
7. The institution submits the sustenance allowance proposal to the Directorate of Industries. The supported Committee sanctions it and the money is disbursed directly to the innovator after monthly progress reports are received from the incubation centre. You do not apply separately for this.
8. Once the idea is ready for commercialisation, the incubation centre recommends marketing assistance and seed or angel funding.
9. After commercialisation, apply online through the single window portal at emerginghimachal.hp.gov.in for the industrial incentives; interest subvention, plot allotment and the rest: using the common application form, and track the status and approvals there.

For host institutions, the route is different: the interested institution submits its proposal to the Director of Industries in the prescribed format, and the Director places it before the Executive Committee for consideration and approval.

What relaxations do HP startups get on compliance?

The scheme deliberately lightens the regulatory load in the early years:

• Self-certification only. All new enterprises submit self-certified documents online or manually, and the concerned department issues provisional registration within 15 days of submission.
• No inspections for three years by the Labour Department, HP Pollution Control Board, Drug Department or Food and Civil Supplies Department without the permission of the Head of Department. An inspection can be triggered only by a written complaint approved by at least one officer senior to the inspecting officer.
• First-year self-declaration under nine labour laws including the Industrial Disputes Act 1947, the Trade Unions Act 1926, the BoCW Act 1996, the Payment of Gratuity Act 1972, the Contract Labour Act 1970, the EPF Act 1952 and the ESI Act 1948, using the formats developed by the Ministry of Labour and Employment.
• Green and Orange category startups in notified industrial areas that do not need environment clearance get consent to establish on self-certification without prior inspection.

The scheme also mandates early business for IT, ITeS and electronics startups: in e-governance projects of state departments, boards and corporations, the chosen solution provider or system integrator must pass on 5 to 10 per cent of the contract value as job work to eligible startups and to students of shortlisted technical colleges in Himachal Pradesh.

Who monitors the scheme?

An supported Committee chaired by the Principal Secretary (Industry) reviews and drives the scheme. Its members are the Principal Secretaries of IT and Technical Education, the Excise and Taxation Commissioner, the Labour Commissioner, the Special, Additional or Joint Secretary (Finance), the Special, Additional or Joint Secretary (Industries) and the Member Secretary of the HP Pollution Control Board, with the Director of Industries as Member Secretary. The committee meets at least once a year and approves grants-in-aid and incentives. The scheme is reviewed annually.

All admissible benefits are administered by the Directorate of Industries through identified incubators as implementation partners.

Common reasons applications stall

• Applying without an incubation route. The sustenance allowance flows only on the recommendation of a host institution's incubation centre and the approval of the supported Committee.
• Not filing monthly progress reports. Disbursement continues only after the incubation centre reports progress each month.
• Claiming the same incentive twice. The same component cannot be funded under both a state and a central scheme.
• A manufacturing unit set up before 1 April 2016, which falls outside the definition of a new industry for this scheme.
• Applying as a for-profit nodal institute, which the application form does not permit.
• Missing resumes. Resumes of all promoters, directors and co-working partners are a compulsory attachment for host institute applications.

Where to get help

• Department of Industries, Udyog Bhawan, Bemloe, Shimla, Himachal Pradesh.
• Phone: 0177-2622735, working days 10 AM to 5 PM.
• Email: startuphimachal@gmail.com.
• Single window portal: emerginghimachal.hp.gov.in, for online applications, tracking and Know Your Approvals.

A note on currency of figures. Every amount on this page comes from the 15 November 2016 notification and the department's published incentive procedure effective 1 April 2018, which are the guideline documents the state has put in the public domain. The scheme has been reviewed annually since, and the state startup portal has moved. Confirm the amount applicable to your case with the Directorate of Industries before committing spending. This page does not carry any figure that could not be traced to an official document.