Tilpath Valley Biodiversity Park spreads over an area of 69.56 ha on the Southern Ridge that is contiguous with Aravalli ranges of Haryana, in south Delhi, New Delhi India.

Proposed Amendments Would Make Foreign Investment in India’s Biological Resources Easier

By Aparajita Lath

Indian lawmakers are currently debating proposed amendments that would make it easier for foreign investors to research and develop products from native biological resources, such as plants.

India is one of the 17 internationally recognized mega biodiversity countries, and hosts four of the 35 globally recognized biodiversity hotspots.

Since countries have sovereign rights over their biological resources, Indian companies enjoy easier access to and use of these biological resources for various commercial applications, including pharmaceuticals, cosmetics, and biotechnology. Foreign companies and Indian companies with any foreign participation in share capital or management are strictly regulated.

The (Indian) Biological Diversity Act was enacted in 2002 to facilitate the development of products relying on Indian biodiversity.  The Act applies to entities that obtain Indian biological resources (plants, animals, micro-organisms and their genetic material) and/or traditional knowledge for research or for making value-added products.

The initial legislation was modelled on strict nationalistic lines. Now, the Indian government is proposing changes to this scheme through the Biological Diversity (Amendment) Bill, 2021. The amendments have not yet been passed, but a Joint Parliamentary Committee (JPC) recently presented its report on the amendments.

One particularly significant change is the proposal to encourage foreign investment, which may be attractive to foreign investors interested in India’s biological resources.

For example, foreign companies or Indian companies with foreign participation need to obtain prior permission from the National Biodiversity Authority (NBA) to obtain any biological resource for the purpose of research, bio-survey, bio-utilization or commercial utilization. Similarly, research results cannot be transferred to foreign entities without permission. On the other hand, Indian entities are only required to notify state boards prior to conducting certain activities.

The amendments would reduce the distinction between foreign and Indian companies. As per the amendments, foreign investment in Indian companies is encouraged, as long as the company remains under Indian “control.” In other words, foreign investment up to at least 49% (less than majority) is encouraged. Consequently, such companies will be treated on par with other Indian companies, and will be subject to less regulation.

However, determining “control” is not always straightforward. This depends on several factors, including the ability to appoint majority directors, ability to control management and policy decisions, number of investors, size of investments of each investor, control rights negotiated in investment agreements, and veto rights under the law. Nonetheless, this proposal is a marked shift in policy.

Foreign investment in Indian companies may enable research collaborations in various sectors. Further, the investment route can facilitate access to Indian biological resources and research that otherwise may have been out of reasonable reach of foreign entities. Increased funding can also boost innovation and research in India, thereby benefiting local companies. Local communities also stand to gain through increased prospects of benefit sharing. For example, the proposed amendments may facilitate more developments such as the partnership that brought Jeevani (the “life giving” drug) to market.

Jeevani, made from the “red bull” berries discovered by the Kani tribe, became very popular in and outside India in the early 2000s.  Anecdotal evidence suggests that the success of the drug benefited the pharmaceutical company responsible for its commercialization, as well as the scientists involved in its development, and the tribe.

Strikingly, the arrangement for benefit sharing with the Kani tribe came at time when Indian law did not mandate such sharing. With the Biological Diversity Act and its proposed amendments, we might expect further facilitation of local knowledge and benefit sharing.

In reality, though, there is a lack of empirical data to show that the Act is serving its intended purpose. Even the JPC report is silent on whether local communities have actually benefited, and the extent of local community participation.

The system created by the Act has not benefited companies and research institutes either – complicated and delayed approval processes, implementation problems, lack of clarity over the scope of the law, arbitrary enforcement actions, and other issues have dampened interest. Solutions to some of these issues, e.g., fast-tracking approvals are being considered under the current bill.

Some also argue that the role of natural resources in the discovery of new molecules is less important now than it has been in the past. New technologies, including synthetic biology, are replacing natural products and redefining access to resources in ways that may not have been foreseeable in the past.

Further, patenting inventions based on Indian biological resources presents problems. A patentee is required to jump through several hoops – such as obtaining permission from the NBA, and then applying to the Patent Office. Patent eligibility can become an issue if the invention is ‘in effect traditional knowledge.’ Things occurring in nature also are not patentable. Without a patent, incentive to invest may reduce.

In conclusion, if the Amendments are passed, it will remain to be seen whether they lead to increased foreign funding. Whether this funding will further research and benefit sharing with local communities is also an open question.

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