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INCENTIVES FOR INVESTMENTS IN INDIAN BIOTECHNOLOGY INDUSTRY

Mohan Manohar June 18, 2012
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A number of incentives have been extended by the Govt. of India to promote   Biotechnology Industry. Major incentives are listed below:-

•    100% foreign equity investment is permissible automatically in drugs and pharmaceuticals and over 74% in other sectors on case by case basis.
•    Fast track clearance for Foreign Direct Investment (FDI)
•    Depreciation allowance on Plant & Machinery set up based on indigenous technology.
•    Customs duty exemption on goods imported for use in Government funded R&D projects.
•    Customs and Excise duty exemption to recognised Scientific and Industrial Research Organizations (SIROs).
•    150% weighted tax deductions on R&D expenditure.
•    3 years excise duty waiver on patented products.
•    100% rebate on own R&D expenditure.

The Budget for 2003-2004 has extended Income Tax concessions to biotechnology units at par with pharmaceuticals and information technology units, reduction in peak customs duty, tax holiday to R&D companies to be established up to March 31, 2004, etc. to promote Healthcare Biotechnology sector.  Thus, the budget attempts to promote R&D and biotech initiatives, though it may not have any immediate impact on the earnings of the enterprises engaged in this sector.

Initiatives taken by various state govt. to promote  bio-tech industry

   A few states like Andhra Pradesh, Tamil Nadu, Karnataka are taking special interest in promoting  enterprises engaged in biotechnology sector. State-wise initiative taken in this regard are furnished below :
    Andhra Pradesh      :  The government of Andhra Pradesh has set up a Knowledge Park near Hyderabad in collaboration with ICICI which is emerging as a leading bio-cluster. Recently, the government has also announced the establishment of a Genome Valley which will focus on Genomics based R&D.

   Tamil Nadu   :  The government of Tamil Nadu is facilitating the formation of biotechnology enterprise zones (Biovalley) on the lines of Silicon Valley to exploit the bio resources of the state. Four biotech parks and a bioinformatics and genome centre are proposed to be established for leveraging the bio resources of the agro-ecological zones of Tamil Nadu.

Maharashtra   :   The government of Maharashtra has announced the establishment of a Biotech Park in Pune to house a pilot plant facility for start-up companies. The State Government has also announced seed capital facility for biotech companies. The presence of a large pharmacy sector in the state is expected to generate interest in bio therapeutics, diagnostics and veterinary products.

   Karnataka  : The Karnataka Government has announced a biotech policy to promote this sector and proposes to set up an institute for bioinformatics in Bangalore. It is also creating a Biotechnology Fund which will have inflows from the biotech companies.  This fund may be used for incubation of new projects and promotion of the sector in the state. Karnataka has also planned to launch India’s first state sponsored biotechnology venture capital fund to promote the sector. Besides, three biotech parks are emerging in the state.

   Himachal Pradesh  :  H.P. Government has prepared a blue print for promotion of biotechnology industries in the state. This includes setting up of biotechnology parks, conservation and exploitation of bio resources, intensification of R&D and promoting biotechnology entrepreneurship through tax concessions and relaxed labour laws.

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Various rules & regulations governing bio-tech industry

   The progress of this industry depends on various regulations like Patents Law including product patents, Plant Varieties Protection legislation, Biological Diversity Bill, 2000, Drugs and Cosmetics Act, Environment Protection Act, Cell Rules, etc. The provisions of these regulations are discussed briefly hereunder :-

Patents Law

Intellectual Property (IP) is the most valuable asset of a biotechnology company. IP rights can protect the tremendous research efforts of innovators from having their innovations replicated by competitors. Some of the forms of IP with respect to biotechnology are patents, trademarks, copyright, trade secrets, plant breeder’s rights and industrial designs. The most important IP rights for biotechnology companies tend to be patents. India had a product patent regime for all innovations as per the 1911 Act, up to 1970. The Patents Act, 1970 excluded pharmaceuticals and agro-chemical products from eligibility for product patents, in order to provide for development of local pharmaceutical industries. Under Section 5 of the Patents Act,  patents are presently restricted to the methods or process of manufacture and not extended to the substances/ products themselves. This resulted in development of considerable expertise in reverse engineering of drugs that are eligible for patent as products throughout the industrialized world but unprotectable  in India.

With  a view to comply with the WTO commitments on patenting of pharmaceuticals (and  agro-chemical) products, India has started on a process of amending the Patents Act by providing exclusive marketing rights (EMRs) and creating a mailbox system for patent applications for a period of five years or until the patent is granted or rejected, whichever is earlier. The provision relating to EMRs was introduced in the Patents (Amendment) Act, 1999. The amended Act grants the inventors what is known as ‘pipeline protection’.

The steps taken by the Government are within the broad framework of procedures and principles of the WTO. In terms of the TRIPS Agreement, India has time till January 1, 2005 to extend patent protection to this area. In order to bring about an effective growth in the biotechnology sector, the industry will have to change its orientation and focus on R&D. Product patent protection is expected to encourage research in developing inexpensive drugs that suit the Indian disease profile.

Plant Varieties Protection

Under the TRIPS agreement India is obligated to put in place a sui generis plant varieties protection (PVP) law. The Government of India has since introduced a bill, Protection of Plant and Varieties and Farmers Rights Bill, 2000 (PVP Bill) in this area. The PVP Bill is designed to recognise farmer’s rights over his seeds. It also has a provision for national gene fund for sharing the benefits with the traditional conservers of the variety. This bill will have implications for bio-agro sector. The concept of plant breeders’ rights arises from the need to provide incentives to plant breeders engaged in the creative work of research which sustains agricultural progress through returns on investments made in research and persuade the researcher to share the benefits of his creativity with the society.

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Mohan Manohar

Mohan Manohar is a blogger from India who founded Ittech back in 2007. He is passionate about all things tech and knows the Internet and computers like the back of his hand.

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