Initially, the fund will have a base of Rs 100 crore and the Small Industry Development Bank of India (SIDBI) has been asked to float a fully owned subsidiary trustee company to run the venture capital fund exclusively dealing with the software industry.

Information and Broadcasting Minister, Pramod Mahajan told newsmen that the proposal was approved by the Cabinet Committee on Economic Affairs (CCEA) at its meeting chaired by the Prime Minister Atal Bihari Vajpayee.

Mahajan said the aim of the fund was to provide start up capital to the entrepreneurs, especially software professionals, who do not have sufficient funds.

The software industry has been showing a growth of more than 50 per cent till 1997-98 and during the last financial year, it recorded agrowth of 80 per cent following number of measures taken by the Vajpayee government. The proposal of setting up venture capital fund is expected to result in higher growth in the next few years, Mahajan said.

Reacting to the new fund, the National Association of Software and Service Companies (Nasscom) today hailed the Union government's decision to set up a venture capital fund for the information technology sector.

The fund would greatly help start-ups, small and medium sized companies, Nasscom president, Dewang Mehta said. The decision has met one of the major recommendations of the IT task force, Mehta said. The task force had submitted 108 recommendations to the government.

The fund will also include the amount raised through Department of Electronics, Industrial Development Bank of India, Industrial and Finance Corporation of India and Nasscom.

Mehta said Nasscom would act as an umbrella organisation in mobilising domestic IT companies, NRIs, overseas venture capital funds as well as successfulsoftware entrepreneurs to provide additional resources for the fund.

He said according to a survey conducted by Nasscom, the software driven IT industry requires around Rs 2,100 crore of venture capital fund in the next five years. The government's decision to set up a Rs 100-crore fund is the beginning of a new venture capital movement in the country, he said.

``As the government has recently allowed the concept of sweat equity and given fresh incentives for venture capital funds in the recent budget, we expect more and more private and public venture capital funds would be created in near future and an atmosphere of angel investment, seed capital funding and venture funding will take off in the country,'' he said.