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INTERNATIONAL NORMS MAY BE ADOPTED TO REJIG FDI POLICY

inThe government is proposing a major overhaul of its foreign direct investment (FDI) policy as part of the Narendra Modi-led administration’s plan to woo overseas investors and improve ease of doing business in India, which ranks at a lowly 134 out of 189 global economies in this respect, according to the World Bank.

 

The government is looking to adopt the international practice of linking policy with industrial codes to ensure foreign investors won’t have to wade through complicated press notes or circulars to decipher the policy for a sector.

 

“Discussions are on. There is merit in seeding the industrial codes with the FDI policy,” said a government official aware of the deliberations. The move is in line with the BJP’s election manifesto pledge to ensure “that a conducive, enabling environment is created making ‘doing business’ in India easy. We will focus on cutting the red tape, simplifying the procedures and removing the bottlenecks.”

 

The FDI policy currently lays out a broad sectoral framework, which at times leads to confusion. For example, items such as implants or similar medical equipment get erroneously classified as pharmaceutical products due to the absence of specific guidelines covering them.

 

With the government imposing restrictions on overseas investment in the pharmaceutical sector — previously automatic — the challenge has only increased for foreign investors. Implants, sutures, syringes are more accurately classified as industrial activities linked to the medical and healthcare sectors but cannot be clubbed with the pharmaceutical sector, which is to do with making medicines.

 

The revamp exercise will involve seeding the National Industrial Classification (NIC) 2008 system with the relevant FDI policy, thus accurately capturing an economic activity. The department of industrial policy and promotion (DIPP) had in June announced the switch to NIC 2008, replacing NIC 1987, after the issue was taken up by the finance ministry.

 

“A drill-down FDI policy to each line item of the NIC code will bring about clarity on policy implications, especially in sectors with caps and conditions,” said Akash Gupt, executive director, PwC.

 

The integration of codes and FDI policy had figured at a meeting between officials of the department of economic affairs and DIPP, with the latter deciding to introduce the framework. The adoption of the framework will make it easier for foreign and domestic investors to understand policy regarding any economic activity and also help in hastening approvals.

 

The industrial classification is followed internationally and used to capture economic activity in all enlisted areas. The classification has been worked out by the ministry of statistics and programme implementation in line with globally accepted practices.

(Source: The Economic Times, August 4, 2014)

 

NARENDRA MODI TO TAKE UP WTO ISSUES WITH BARACK OBAMA

 

Prime Minister NarendraModi’s upcoming visit to the US could be significant as India hopes to take trade talks forward when the World Trade Organization (WTO) meets in September after the summer break, signalling its commitment to the multilateral trading system.

 

India will try to engage with other countries during the August break to get stronger backing for its proposal of finding a permanent solution to the issue of public stockholding for food security by December 31.

 

“We are fully committed to the Bali accord and will resume talks in September. Prime Minister will also take up the matter with US President Barack Obama during his visit next month. It is very important to convince the US to get the public procurement matter on the negotiating table,” a government official said.

 

Trade talks collapsed in Geneva last week after India insisted that the entire Bali package, including the food security issue important to developing and poor countries, should be sealed at one go.

 

A protocol on trade facilitation — measures to reform customs procedures and cut red tape to speed up global trade — was to have been signed by July 31, as agreed in Bali. Apprehensive that the developed world would lose interest in the issue of food security once the trade facilitation agreement was signed, India didn’t sign the deal, saying the entire Bali package could be delivered by December 31.

 

WTO’s agreement on agriculture limits farm support at 10 per cent of the value of production based on 1986-88 international prices. India wants the subsidy to be calculated on a more recent base year or indexed to inflation.

 

US Secretary of State John Kerry, who visited India last week, is understood to have told Modi that failure to sign the agreement “sent a confusing signal and undermined the very image the new government was trying to send about India.” Modi told Kerry he was more concerned about the small Indian farmer, even though he believed the trade facilitation agreement was good for India.

 

It may be a challenge to convince all 160 members to get back to the negotiation table in September. “PM’s visit will be crucial from many perspectives, including taking forward the Bali deal and also pushing WTO to the successful resolution of outstanding issues of the Doha round,” said Abhijit Das, a trade policy expert with the Centre for WTO Studies at the Indian Institute of Foreign Trade.

 

He said it will be important for India to get on board other countries that have similar problems related to food security. “A broad-based coalition would need to be formed to take the food security agenda forward,” he said. While it will be the responsibility of the entire WTO membership to take forward the Bali deal, India’s role will be crucial in trying to broaden the base of countries, added Das.

 

India was left isolated in Geneva, with even BRIC countries not supporting its bid for a permanent solution on food security simultaneously with the trade facilitation agreement. Only Bolivia, Venezuela and Cuba backed India, while China remained silent all through and Brazil and Russia fought for trade facilitation. New Delhi did not get support from all 46 members of the G-33 grouping.

 

Indian commerce department officials maintain they are prepared to engage from Day 1 of September even though WTO Director-General Roberto Azevedo had warned of ‘significant consequences’ if no deal was reached on trade facilitation.

 

“The fact that India has gone back on an agreement and there is great annoyance and disappointment among major countries, it may not be easy to get countries together on India’s demands,” said Anwarul Hoda, a former deputy director general of the WTO who is now Chair Professor at the Indian Council for Research on International Economic Relations.

 

He said finding a final solution would mean changing the WTO agreement and procedures, which requires parliamentary approval in many countries. It may not be easy to get a solution the way India wants, he said. In its last proposal on July 31, India wanted a peace clause, which provides interim protection against actionable subsidies, to exist until a permanent solution was found, as against the four years interpreted by most member countries.

 

“The Modi-Obama meeting will play a very important role in getting various members together to revive talks. If the US agrees, it will not be difficult to get others on board,” said Pradeep S Mehta, secretary general of Consumer Unity & Trust Society (CUTS International).

(Source: The Economic Times, August 4, 2014)

 

DRUGMAKERS REAP BENEFITS OF PRICING GAP

 

NEW DELHI: Even as pharmaceutical companies are opposing the latest regulatory move to keep a check on inter-brand price difference, market data show that in some cases the maximum retail price (MRP) of various brands of the same medicine varies by as much as 1,700-1,800 per cent. That leaves a huge profit margin for drug firms even after paying wholesalers and retailers.

 

Data also depicts pricing parity is more significant between brands sold by domestic manufacturers and those marketed by multinational firms. While most multinationals attribute high prices of their products to better quality, standard procedures and efficacy, industry experts and regulatory authorities say the difference in MRP is due to higher cost incurred in marketing and promotion coupled with better profit margins.

 

This is despite the fact that the ceiling price in case of even regulated medicines provides for up to 16 and eight per cent extra margin for retailers and wholesalers, respectively. Besides, it also takes into account packaging and conversion cost. Regulatory officials say despite having such margins within the price caps, companies make extraordinary profits.

 

For instance, latest data compiled by Monthly Index of Medical Specialities show a price difference of over 1,733 per cent between Novartis’ Femara and Biochem’s Oncolet, two different brands of letrozole used in the treatment of breast cancer. While a strip of 10 tablets of Femara (letrozole 2.5 mg) is priced at Rs 1,815, the MRP of Oncolet is Rs 99. Similarly, four tablets of Sanofi’s Actonel are priced at Rs 2,000, whereas the same formulation Risedronate 35 mg is sold by Cipla as Risofos at an MRP of Rs 110 for four tablets.

 

However, price differences exist between two indigenously manufactured brands as well though the parity might not be so much as is in the case of those sold by multinational companies.

 

Drug price regulator National Pharmaceutical Pricing Authority (NPPA), which brought under price control around 50 new formulations in the anti-diabetes and cardiovascular segment, said, “There exists a huge inter-brand price difference in branded-generics/off patent drugs.”

 

According to the regulator, such inter-brand price difference indicates a “severe market failure”. To fill this gap, it identified eight therapeutic areas with disease intensity and said if the price of any drug in these categories is more than 25 per cent higher than the most expensive medicine among the regulated products, then the price of such drugs will be capped by NPPA.

 

Currently, under the National Pharmaceutical Pricing Policy, the government directly regulates the prices of 348 medicines.

 

NPPA used a rarely used provision of Paragraph -19 of Drugs Price Control Order (DPCO), 2013. It empowers NPPA to reduce price of medicines in “extraordinary” circumstances in public interest to bring under price control additional products, where there are huge inter-brand price differences because of extraordinary margins. Paragraph 19 empowers NPPA to reduce price of medicines in “extraordinary” circumstances in public interest.

 

However, domestic as well as foreign drug makers have now approached different courts in the country against the regulator’s move.

 

Indian Pharmaceutical Alliance (IPA), representing domestic firms such as Sun Pharma, Cadila Health, Lupin and Torrent, have filed a writ petition in the Bombay High Court (HC) opposing the price cut. The Organisation of Pharmaceutical Producers of India (OPPI), the industry association of all big multinationals present in India, including Novartis, Pfizer and Sanofi, has approached Delhi HC.

 

These companies argue that NPPA’s move is out of the purview of the pricing policy, which mandates the authority to only regulate prices of 348 medicines. Besides, curtailing margins would mean companies would not be able to invest in research and development and good manufacturing practices, which is an integral part of the pharmaceutical industry.

(Source: Business Standard, August 4, 2014)

 

BLACK ECONOMY NOW AMOUNTS TO 75 PER CENT OF GDP

 

NEW DELHI: Driven substantially by the higher education sector, real estate deals and mining income, India’s black economy could now be nearly three-quarters the size of its reported Gross Domestic Product (GDP). These are among the findings of a confidential report commissioned by the government and accessed exclusively by The Hindu .

 

Since there were no “reliable” estimates of black money generated in India and held within and outside the country, the UPA government commissioned the National Institute of Public Finance and Policy (NIPFP) to estimate the black money in India and held overseas by Indians.

 

The Special Investigation Team on black money, constituted by the Narendra Modi government on May 27 in compliance with a Supreme Court directive, is studying the report.

 

Though the report was submitted to the Finance Ministry in December 2013, the UPA’s Finance Minister P. Chidambaram did not place it in Parliament. Nor has his successor Arun Jaitley done so.

 

The capitation fees collected by private colleges, on management quota seats in professional courses, last year was around Rs 5,953 crore, the report estimates.

(Source: The Hindu, August 4, 2014)

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