Karnataka government eyes innovation push through Innovation Authority Bill

Karnataka’s regulatory sandbox — a controlled environment which can be used to test disruptive technology, products or services — will be open to innovators across the country.

But to take advantage of the sandbox, which the government claims is India’s first pan-sector initiative, innovators must have business or operations in the state.

The Karnataka Innovation Authority (KIA) Bill, which the government has tabled in the legislature, proposes sandboxes that will exempt innovators from regulations.

According to the Bill, participation in the sandbox will be open to any person who “carries on business or has a registered office or branch office in Karnataka”.

And the product or service that will be tested in the regulatory sandbox should be “a genuine innovation” that benefits consumers in Karnataka with the ability to generate employment.

In any case, these will be disruptions that existing laws do not permit, resulting in regulatory barriers.

“We’re looking at providing regulatory exemption for a year, which can be extended by one more year. So, innovators will get up to two years to test their products or technologies in a controlled environment,” Deputy Chief Minister CN Ashwath Narayan, the IT/BT minister piloting this initiative, told DH.

Karnataka has had its share of regulatory tussle with disruptive technology. In the transport sector, for instance, carpooling and shuttle services are restricted under the motor vehicles rules.

It was widely believed that the first regulatory sandbox was the Financial Control Authority the UK established in 2015 for the fintech space.

The Reserve Bank of India, SEBI and Maharashtra government have also set up regulatory sandboxes to boost fintech.

“Everybody is trying to attract innovation, which along with technology brings benefits. If one innovation flourishes, others will also mushroom,” Narayan said.

The chief minister-led KIA will decide on setting up regulatory sandboxes, according to the Bill. Sandboxes will be established in two ways: One, based on an application the KIA receives from innovators seeking a sandbox, which it will decide upon within 60 days after determining the feasibility; two, the KIA itself setting up a sandbox suo motu.

“The innovation under the sandbox will be confined to a geographic area,” Narayan pointed out. “Once it becomes successful, we will have to bring a new law to do away with the regulatory barrier that existed.” The KIA Bill will be taken up for passage when the legislature session resumes on March 2.