Encouraging agrochemical MNCs to set up shop in India: Get ‘data exclusivity’ right

By: |
June 11, 2020 6:15 AM

Agro-chemical majors won’t find India attractive for investment, as long as the regulator micro-manages even production decisions

Modi government, MNC, Covid-19 gloabl impact, agrochemical sector, data generation, us china trade tension, reloaction destination, Formulation ImportIn the agrochemical sector, out of the total import of technical material or active ingredients that go into making end-use formulations, imports from China alone account for about 50%.

Given China’s frequent changes in rules, targeting of MNCs, its deteriorating trade and investment relationship with the US, European countries and Japan, and questions over its role in spread of Covid-19 globally, hundreds of MNCs are planning to exit that country. They would either go back to their country of origin, or look for relocation destinations such as India. The Modi government has strongly indicated its intent to bring them here.

In the agrochemical sector, out of the total import of technical material or active ingredients that go into making end-use formulations, imports from China alone account for about 50%. The disruption in supply of technical material from China is another reason why India is keen to attract MNCs.

At a macro level, even as the government is wooing MNCs by offering incentives, at the sectoral level, the actions of the national regulator, the Central Insecticide Board and Registration Committee (CIB&RC) may deter them.

The manufacturing, import, sale, distribution and use of pesticides is regulated under the Insecticides Act 1968 to prevent risk to human beings or animals, and for matters connected therewith. The Registration Committee (RC) set up under the Act registers every pesticide after scrutinising the formula, verifying claims of efficacy, safety for humans and animals, specifying the precautions against poisoning, and any other function. The RC is empowered to refuse registration of any pesticide if issues pertaining to safety have not been satisfactorily adhered to.

An applicant wanting to register a new product for the ‘first time’ in India (normally, an MNC with huge stakes in R&D, investing about 8-10% of its revenues in R&D, against India-bred companies spending 1-2%), is required to generate data to demonstrate the product’s ‘safety’ and ‘efficacy’ in Indian conditions—hundreds of million dollars spent globally on toxicity and chemistry studies notwithstanding. It has a fundamental interest in recuperating the huge investment in R&D and data generation, besides ensuring ‘proper’ and ‘scientific’ use of the new product.

These objectives can be achieved only when the ‘first time’ registrant gets a certain period of ‘exclusivity’, during which the RC shall not grant registration to another applicant by relying on registration data of the former. The US and EU have a law on data exclusivity, which is behind most of the ‘new molecule’ discoveries, data generation and registration happening in those countries. But, India does not offer it.

Once the original applicant gets registration under Section 9(3) of IA 1968, subsequent applicants can get registration under Section 9(4) for the same product on payment of nominal fee ‘without having to submit any data’. As a result, for every registration u/s 9(3), there are multiple registrations u/s 9(4). Currently, there are over 250,000 registrations against only 280 registered molecules, or close to 900 per molecule. This encourages non-serious players with little regard for quality and standards (30% of agrochemicals are sub-standard).

Meanwhile, in 2000, the RC had issued guidelines for grant of registration for ‘formulation import without registering the technical’. In the absence of registration of underlying technical, the formulation could not be copied, thereby preventing the new product from falling into unsafe hands. This was a sort of ‘data exclusivity’ granted through administrative route.

In 2007, this protection was truncated, with the RC allowing “deemed” registration of the technical after three years from the date of registering the formulation import. It meant that, on completion of three years from the date of registering formulation import, the technical will automatically get registered, paving the way for 9(4) registrations.

Going a step further, in its 381st meeting (December 6, 2017), the RC took the following decision: An affidavit shall be obtained from the applicants for import of formulation without registering technical u/s 9(3) about status of registration of technical of the same product for indigenous manufacture u/s 9(3)/9(4) in the name of same firm or any other firm for use in the country. This requirement may be imposed with immediate effect including the applications under scrutiny process.

It means that, having taken registration for import of formulation without registering technical u/s 9(3), the MNC must take ‘immediate’ steps to register the technical. Applying this even to applications under scrutiny process makes it bizarre (it could lead to outright rejection of the application if the applicant decides not to give the affidavit). Such undertakings are also being sought for other registrations, viz. import of technical pesticide under the ‘Technical Import (TI) u/s 9(3) and TI-New source u/s 9(3)’.

This sounds the death knell of whatever limited protection (read: three years) was available to innovators. It discourages MNCs from setting up shop in India as their intellectual property remains unprotected.

That the regulator is micro-managing things in enterprises is also evident from this decision of RC [381st meeting]: If an applicant is possessing a certificate of registration of a product Technical or Formulation for indigenous manufacturing, the same applicant shall not be allowed for registration of the same pesticide Technical or Formulation under any import category.

If technical of a pesticide is registered for indigenous manufacture to any firm, then application for registration of Formulation Import (FI) of such pesticide molecule shall not be considered. What if the firm is unable to supply a product from its domestic source? In that scenario, farmers will suffer as the import option is shut.

While registering a pesticide, the RC should only focus on assessing its ‘safety’ and ‘efficacy’. Decisions on what is to be produced in India or imported should be left to individual firms. Such intrusive regulations will not only undermine our efforts to serve farmers better (and attracting MNCs), but also be open to challenge at WTO.

The author is policy analyst

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Inside Track: Decoding Sanjiv Goenka’s Indian Premier League choice
2The unenviable job: Meet Manchester United new boss Ralf Rangnick
3Across the Aisle by P Chidambaram: Precious resource in peril