PMFAI’s submission to Government of India on Issues concerning “Agrochemicals & Chemicals” Industry

PMFAI has appealed to Ministry of Chemicals & Fertilizers and Ministry of Finance, Govt. of India on issues concerning the Agrochemicals industry as below.

“We were surprised to note the facts and figures about the surging imports of Chemicals and Agrochemicals to India - in 1980s the total imports of chemicals were approximately Rs.5,000 crores (US$ 705 million) which now exceeds Rs.115,000 crores (US$ 16200 million)?  ”

This is very harmful to Indian economy as it not only drains huge amounts in foreign exchange but also affect growth of Indian chemical sector.

“We are happy to note the Hon’ble Finance Minister’s recent announcement of reducing Corporate Taxes to 25% from 35% and 15% corporate tax for new manufacturing units registering before October 1, 2019 and starting operations before 2023 to encourage new investments in Indian manufacturing sector. ”

However, to make the above taxation reforms to be successful and attract Foreign Direct Investments (FDIs) as well as local investments in new manufacturing plants, there is an immediate need to revise present Customs Duty structures on Finished Chemicals & Pesticides Formulations imported to the country. Present Customs duty structure is alarmingly discouraging to attract investments to indigenous manufacturing in comparison to imports. 

Unless Customs Duty structures are properly revised, no-one will take the risk of making huge investments in setting up a manufacturing plants in India just to make a saving of 2.5% difference. The explanation in this regard as below :

(a)    Present Basic Customs Duty on Raw-materials/Intermediates (which goes in manufacturing) under Chapter 29 is 7.5% ;
(b)    Present Basic Customs Duty on imports of Technical Grade material used for manufacturing under Chapter 38 is 10%; and
(c)    Present Basic Customs duty on imports of Readymade Pesticide Formulations (Finished product) under Chapter 38 is also 10%.

The difference of just 2.5% Customs Duty between Raw-material/Intermediates and Finished Chemicals, Pesticides or Pharma products are not enough to attract investments in manufacturing.  Investor will have to bear capital investment, bank interests on loan, plant & machineries, licensing, manpower besides the gestation period of 2 years from setting up manufacturing plant to production and marketing.

For a small gain of just 2.5% Customs Duty between Raw-material and Finished products, who will make investments in Manufacturing Plants & Machineries?  Setting up of a manufacturing plant requires – Financial Investments; Land; Plant & Machineries; Licensing permissions; meeting of environmental and pollution control measures; expert & technical manpower etc. 

Unless and until Customs Duty structures are revised and harmonized, all the efforts of Government to attract investments in manufacturing sector and creating job opportunities for Indian citizen will not have any major impact. 

Unless and until Customs Duty structures are revised and harmonized, all the efforts of Government to attract new investments in manufacturing sector and creating job opportunities for Indian citizen likely to go waste.  Above Customs Duty structures are quite discouraging to attract investments in indigenous manufacturing of Chemicals and Pesticides, as Customs Duty on Raw-material/ Intermediates which goes in manufacturing is 7.5% ; and imports of Finished products of readymade Pesticides Formulations and Chemicals under Chapter 38 attracts only 10% Customs Duty.

PMFAI APPEAL :

"We therefore, request Government to look into the matter and see that Finished Pesticide Formulations or Chemicals must be put under minimum Customs Duty of 20%.  This will attract entrepreneurs to invest in manufacturing rather than importing and selling of products. This step will also help reducing imports drastically and the country can save huge amounts spent in foreign exchange."

Data Protection concerning Agrochemicals

"We refer to the issue of Data Protection for Agrochemicals. We once again have to inform that 20 years of Patent Protection is too long a period for inventors to recover their investments and fairly good profits. Any further extension of protection by way Data Protection meant to evergreening of patents and creating monopolies.  We therefore, give below in brief the reasons why Data Protection should not be considered":

a)    Provisions for Data Exclusivity/Data Protection if provided, will effectively be extending the monopoly of MNCs for a further period, who already enjoys 20 years Patent Protection under WTO provisions which has become operational from the year 2005. If Data Protection is given further, it is like ever-greening of Patents.

b)    Data Exclusivity in Agrochemicals sector will not only delay entry of Generics by creating additional period of legal monopoly but will also make Agrochemicals/Pesticides un-affordable to Indian Farmers.

c)    Data Protection or Data Exclusivity will obstruct growth of indigenous manufacturers and will work against the vision of “Make in India”.

d)    Further, Data Protection or any type of protection is a commercial matter and the same is taken care under Patents Act / TRIPS, which comes under the purview of Ministry of Commerce & Industry.  Hence no need for creating any TRIPS plus provisions by way of Data Protection in Insecticides Act or in Pesticides Management Bill (PMB).

"In this regard we also would like to remind about the landmark Judgement of Supreme Court in 2013 in Pharma company Novartis patent case related to Cancer Drug 'Gleevec' in India.  In the said case Supreme Court upheld the decision of Indian Patent office’s rejection of patent application of Novartis. "

The case was an example of multi-national companies trying to extend patent period to take commercial advantage.
 
Data Protection is dubious provision in law proposed by MNCs which would create monopolies leading to exorbitant prices, detrimental to Indian farmers who would be denied crop protection products at economic prices, due to delay in entry of generic products to market. This should not be allowed. 

Moreover, if Data Protection is considered for Agrochemicals, the same will affect and applicable to all sectors including Pharma, Chemicals, Fertilisers etc and will unnecessarily open up pandora of legal battles detrimental to national interest.

The Parliamentary Committee has also given clear cut decision that no Data Protections be given beyond Patent period. Hence the Ministry of Chemicals & Fertilizers should not fall prey to any such demands of MNCs or importers.

Granting registrations for imports of Technical Grade Pesticides be made on Actual user basis, to restrict imports by Traders and imports of sub-standard products to the country.

"As suggested in our earlier submissions, registrations for Imports of Technical Grade Pesticides be made compulsorily on actual user basis, and for consumption by manufacturers of Formulation products in the country. "

"We also recommend that certificate of registration should also carry remarks as 'for consumption by actual users and not for sale' to ensure health and safety of Farmers & Environment as also to avoid any residue problems due to use of sub-standard products. The step not only will help supporting indigenous manufacturing sector but also minimizing imports. For your information, as on today more than Rs.2000 crores worth technical grade pesticides are imported by traders and the same are sold to unscrupulous manufacturers of sub-standard products operating without manufacturing licenses. Traders selling these chemicals are the main source of sub-standard pesticides formulations marketed in India and Farmers are great sufferers."