New Delhi: The Steel Ministry has proposed Rs 450 crore budgetary supports for research and development activities in the sector during the 12th Five-Year Plan (2012-17), four times more than in the previous Plan.

"It is proposed that government budgetary support for R&D activities in the steel sector may be increased from Rs 111.1 crore in the 11th Plan to Rs 450 crore in the 12th Plan," the Working Group on Steel for the 12th Five-Year Plan has said.

The group, headed by Steel Secretary P K Mishra, is of the view that the R&D investments in Indian steel sector had been quite low varying in range of 0.15-0.25 percent of turnover.

"This is despite the fact that Indian steel industry has enjoyed a decent level of profitability in the last few years," the committee said.

Lack of "seriousness" on R&D activities have resulted in a high capital costs for modernisation and building new steel capacities as India continues to depend on the "West" for import of major equipment and technologies.

"It has also resulted in high level of dependence on imported raw materials as the country has failed to develop indigenous technologies," it said.

The group suggested that India should aim at achieving a strategic goal of increasing R&D expenditure to one percent of turnover by the end of the terminal year of the 12th Plan.

"This will require stepping up R&D expenditure both by the industry and the government. To further incentivise R&D activities by the industry, it is proposed to widen the scope of tax concessions to cover items such as expenses related to design, development and running of pilot plant," it said.

However, the group warned that the real objective of incentivising the industry for taking up R&D should not be lost through innovative accounting methods.

"It is therefore proposed that expenditure on routine activities such as testing and standardisation should not be classified as R&D expenditure and accordingly, expenditure incurred only on improvement and innovation may qualify as R&D expenditure," it said.