The Department of Biotechnology (DBT) has proposed to institute 'Small Business Innovation Research Initiative' (SBIRI) scheme in 2005-06 for supporting small and medium size enterprises with a grant or loan to help early phase of product development.

Companies with up to 1000 employees will be eligible under the scheme. The scheme will support pre-proof of concept, early stage innovative research and provide mentorship and problem solving support in addition to the grant/soft loan. The SBIRI scheme will operate in two phases of innovation and product development.

The funding in the phase I will be provided for highly innovative, early stage, pre-proof-of-concept research. Preference will be given to proposals that address important national needs. The maximum amount of funding to an enterprise will be limited to Rs 50 lakh with not more than 50 per cent of it going as grant and the remaining as an interest free loan.

For projects to be considered at this stage, though a partner from a public R&D institution would be considered important, it will not be a mandatory requirement for those companies that have good quality scientists. This should encourage high quality scientists to agree to work in small and medium biotech companies. The R&D requirement of the public institution will be met through a grant.

It is expected that some of the proposals funded with SBIRI phase-I will establish the proof-of-concept. At this stage, the ability of the project to get venture capital funding improves. Such projects will be eligible for phase-II funding. Some projects could be eligible for direct phase-II support.

It is proposed to provide soft loan at this stage for product development and commercialisation at an interest rate of 2 per cent. The role of public R&D institution at this stage too is critical. The partner in the public institution at this stage will get the R&D support as grant.

Small and medium knowledge-based industries in biotech sector will also be encouraged to avail of equity support from the SME Growth Fund of Small Industries Development Bank of India (SIDBI), it is learnt.