Wt/tpr/M/313/Add. 1 31 July 2015

4 TRADE POLICIES BY SECTOR

4.1 Agriculture

4.1.1 General policy framework

4.1.1.3 Internal measures
Page 102 Para 4.17
"key objective of India's domestic agricultural policy is to ensure stability of food supply and income support for the nearly 60% of the population that is dependent on agriculture. This policy is implemented through price support for farmers such as MSPs for 25 major commodities and for sugar, and the market intervention scheme (MIS) for other crops, input subsidies for fertilizers, power and water, as well as food subsidies (through the targeted public distribution system)."
Question:

1. 
   Could India provide a list of the 25 major commodities that are given MSPs?
   

Reply: The list of 25 major commodities that are given MSP are given at Table 4.3 (page no.103) of the WTO Secretariat Report.

Japan

Report by India (WT/TPR/G/313)
2 ECONOMIC ENVIRONMENT

2.6 Major Challenges

2.6.1 Agriculture and Food Security
Question 1 (Page 10, Paragraph 2.31): The improvement of agricultural productivity is essential for enhancing farmers' livelihood and the points listed in this paragraph such as increasing the irrigated area and investing in research would be effective measures to increase productivity. However, a large part of the government budget is spent on market price support and the public food distribution system. Could India explain why the government doesn't direct more funds to agricultural investment rather than to market price support?
Reply: The Government supports the farm sector in India through various programmes for agricultural research and education, extension, irrigation and for facilitating easier and cheaper access to inputs such as seeds, fertilizers and credit. MSP operations are carried out only in the event of market prices falling below the administered prices.
Market support prices are for providing minimum remunerative price to the farmers to prevent them from resorting to distress sale. For most of the commodities under MSP, generally market prices rule above MSP and, therefore, Government is not required to make any procurement in respect of these commodities. The issue of MSP is linked to livelihood and food security of the poorest of the citizens; a large number of these working in the agriculture sector. In as far as other ways to enhance the farmers livelihood is concerned, India has been constantly working to improve the infrastructure for agricultural sector.
3 THE NEW REFORM AGENDA

3.8 Rationalizing Subsidies
Question 2 (Page 13, Paragraph 3.14): The report describes that "the support extended in India seeks to sustain the livelihoods of the scores of small and marginal farmers rather than for large scale commercial farming". Nevertheless, the report by the High Level Committee on reorienting the role and restructuring of the FCI points out that no more than 6% of the total farmers benefitted from the procurement under MSP. In order to ensure support focused on small and marginal farmers, what kind of concrete measures is the Indian government taking?
Reply: The Government/ FCI has taken following measures to improve outreach of procurement system to the small and marginal farmers: (i) Wide publicity of the specifications such as acceptable moisture content, foreign matters etc. are given so that farmers may bring their produce accordingly and may not face any difficulty after bringing their produce at purchase centres. Handbills/pamphlets are also distributed to farmers for their awareness. (ii) At purchase centres/markets necessary facility for cleaning and weighment are provided, arrangement of moisture meters and gunnies are made so that prompt acceptance of farmer's produce can be ensured. (iii) In States like MP, where the farmers and cooperative societies are registered, the information about date and time for bringing the produce at the centre are given through SMS. (iv) Besides regulated markets, temporary procurement centres are also opened to facilitate easy approach of farmers to MSP operations.
Question 3 (Page 13, Paragraph 3.14):
The report states that "the government has undertaken various measures such as decentralized procurement."

• 
  Please could India explain the details of the decentralized procurement?
  

Reply: The scheme of Decentralized Procurement of food grains has been introduced with a view to effecting savings in food subsidy, enhancing the efficiency of procurement and public distribution and encouraging local procurement to the maximum extent thereby extending the benefits of MSP to local farmers. Under the decentralized procurement scheme, the State Government itself undertakes direct purchase of paddy and wheat on behalf of Government of India. Purchase centres are opened by the State Governments and their agencies as per their requirements.  The State governments procure, store and distribute foodgrains under TPDS and other welfare schemes.  In the event of the total quantity of wheat and rice thus procured falling short of the total allocation made by the Central Government for meeting the requirement of TPDS and other schemes, the Central Government, through FCI, meets the deficit out of the Central Pool stocks. Only a few of the State Governments are presently undertaking Decentralized Procurement.

• 
  What is "the bias towards wheat and rice in incentive structures"?
  

Reply:  These are major food grains consumed by the population in the country and there is no bias towards wheat and rice in the incentive structures. These are most widely grown food crops in India since long and due to large production base, rice are often ruling below MSP in the market during harvest season, which requires price support by the Government. For majority of the other commodities, prices occasionally fall below MSP and then only concerned agencies undertake procurement operations. FCI has a very robust system for controlling the procurement operations and providing food grains for distribution. While other procurement agencies do not have such a robust system, which needs to be strengthened.
The report adds that measures such as decentralized procurement remove the bias. How does the decentralized procurement address the removal of the bias?
Reply: The decentralized procurement system helps in providing better coverage to the farmers and foodgrains procured locally, which may be of specially preferred variety, are distributed locally. This system also helps in saving costs and preventing transit losses.
5 INDIA AND THE WTO

5.1 WTO Negotiations
Question 4: (Page 16, Paragraph 5.6): The Indian Government's report reads "India is in the process of finalizing its categorization of commitments under the Agreement and would be filing the notification in keeping with the provisions of TF agreement." In light of this statement, how is India's notification of category A commitments progressing? When does India anticipate being able to notify its category A commitments?
Also, how is India's ratification of the TFA progressing? When does India anticipate being able to notify the WTO of its acceptance of the TFA?
Reply: The preparation for notification of category A commitments and ratification of TFA are currently underway. No specific date has been fixed for the same.
Report by the Secretariat (WT/TPR/S/313)
3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.4 Tariffs

3.1.4.2 Bound tariffs
Question 5 (Page 42, Paragraphs 3.24-3.25): The report mentions that "around 75% of the tariff is bound", and in particular, "71.1% for non agricultural products" is bound. Furthermore, the report mentions that there exists a "considerable gap between applied and bound rates of tariff". In light of this assessment, how does India attempt to ensure a high degree of predictability in its tariffs?
Reply: It may be true that there exists a gap between applied and bound rates of tariff. However, India has been reducing its import duties over the years. While the average bound MFN rate for all products is around 48%, the applied rates are much lower than the bound rates especially in the case of agricultural goods, a testament to India's steady and continued autonomous tariff liberalization. The simple average MFN applied tariff for all products was just about 13.5% and for non-agricultural products 10.2% in 2013. As many as 69% of India's agricultural tariff lines attracted MFN applied tariffs ranging from 25 to 50% ad valorem. In case of non-agricultural tariff lines, the MFN applied rates range from 5 to 10% ad valorem for as many as 76% tariff lines. Apart from the occasional adjustment in the tariffs on some agricultural commodities in the face of high volatility in food prices, in most cases tariffs have been reduced rather than raised and have generally been continued at the lower levels.

3.1.11 Anti-dumping, countervailing, and safeguard measures

3.1.11.2 Safeguards
Question 6 (Pages 57-58, Paragraph 3.79): We would like to clarify India's organization relating to safeguards investigation. Is it correct that the Director General Safeguards is the investigating authority? If so, how many people engage in safeguard investigation tasks in the section of DG safeguards?
Reply: In exercise of the powers conferred by sub-section (5) of section 8B of the Customs Tariff Act, 1975, the Central Government vide Rule 3 of Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997, appoints Director General (safeguards) by notification in the Official Gazette as the investigating authority for recommending Safeguard duty.
As per Rule 3 of Safeguard Rules, the Central Government may provide to the Director General the services of such other persons and such other facilities as it deems fit. Presently, 31 officers are posted in this Directorate including the Director General.
Question 7 (Page 57-58, Paragraph 3.79): We understand that the Director General may self initiate a safeguard investigation. Concerning the self-initiation how many investigations were initiated under the DG's self-initiative so far? If any, please clarify the products' name subjected to the investigation.
Reply: There has been no investigation carried on self-initiation basis by DG (Safeguards) during the period of review. However, so far only one investigation was initiated by DG (Safeguards) under the Self initiation category on 7 July, 2004 concerning imports of Starch (chapter Heading-1108), Modified Starch (chapter Heading-3505), and Manloc (Cassava, Tapioca) based Sago (chapter Heading-1903).
Question 8 (Page 57, Paragraph 3.78): Does India's investigating authority consider that "Unforeseen Development" stipulated in Article XXI of GATT is a legal requirement for imposing safeguard measures? If so, how does India evaluate what is unforeseen development?
Reply: Though, there is no express provision under the domestic rules to analyse unforeseen circumstances and the methodology that should be followed for analysing unforeseen developments or the WTO Agreement on Safeguards, DG (Safeguards) follows the provisions of Article XIX of GATT, 1994 and the Agreement on Safeguards, which, obligates the national authorities to examine the "unforeseen developments" which led to the serious injury to the Domestic Industry. Accordingly, the Directorate of Safeguards has been consistently examining the issue of "unforeseen developments" in its investigations.
3.1.12 Standards and other technical requirements

3.1.12.1 Standards
Question 9 (Page 59, Paragraph 3.88): Could India indicate sectors in which it has not yet aligned Indian Standards with International standards?
Reply: There are many Indian Standards which are not aligned with international standards. It may not be feasible to clearly list all such sectors.

(Question 10: Page 59, Paragraph 3.90)

Could India indicate specific BIS website addresses (not the address of top page of BIS website) in which draft standards themselves are posted for comments?

Reply: The draft Indian Standards that have been issued for eliciting technical comments are available in the link: http://www.bis.org.in/sf/pros_setting_std.asp.
3.1.13 Sanitary and phytosanitary requirements
Question 11 (Page 64, Paragraph 3.112): The WTO report (WT/TPR/S/313) describes that the Directorate of Plant Protection, Quarantine and Storage in the Ministry of Agriculture has been working to develop a system of e-certification for phytosanitary requirements.
Can India outline its current development of the e-certification system? Does the e-certification aim to develop a bilateral system between India and other countries or ePhyto hub-system which is being developed under the IPPC framework?
Reply: India performs all its Plant Quarantine activities through an on-line system namely "Plant Quarantine Information System (PQIS)". However, as of now there is no on-line sharing of e-phyto certificates with any trading partner. Further India supports to e-phyto hub system being developed by IPPC.
3.2 Measures Directly Affecting Exports

3.2.4 Export prohibitions, restrictions, and licensing

3.2.4.1 Export prohibitions
Question 12 (Page 67, Paragraph 3.125): This Secretariat report describes that export prohibitions on non-basmati rice and wheat were removed on 9 September 2011. We understand that those prohibitions of basmati rice and wheat had been implemented in accordance with paragraph 2(a) of Article XI of GATT 1994. Those prohibitions have not been notified to the Committee on Agriculture. What are the reasons for not notifying them? When will India notify them?
Reply: India has been submitting its notifications accordance with the applicable rules.

3.2.6 Export support and promotion

3.2.6.1 Special economic zones (SEZs)
Question 13 (Pages 68-69, Paragraph 3.136): As mentioned in this Paragraph, although both the exemption of MAT and on export profits and dividend distribution tax were allowed for SEZ companies as an incentive to enhance foreign investment, promote employment and obtain foreign currency through exports under the Government of India (GoI)'s SEZ Act 2005, the exemption of MAT against SEZ companies was suddenly withdrawn on April 1, 2012, through THE FINANCE BILL 2011 and the exemption from dividend distribution tax was also eliminated in 2011. Usually, due to significant depreciation costs, start-up companies tend to see losses in the initial phase. The legal amendment significantly reduced the merits of investment in SEZ. Furthermore, it is unreasonable to apply MAT and dividend distribution tax to the companies which invested in SEZ according to the policy of the GoI prior to 2011. Is the Ministry of Finance considering grandfathering investments that took place before 2011 regime? We would like to ask the Ministry of Finance what kind of relief measure they considering for such companies now.
Reply: Minimum Alternate Tax (MAT) is levied on the principle that everyone participating in the economy must contribute to the exchequer. As a result, grandfathering investments made before Finance Act, 2011 would mean that the grandfathered unit would be exempt from levy of MAT for all times to come which would be against the basic principle behind levy of MAT.
3.3.5 Intellectual property rights

3.3.5.1 Introduction
Question 14 (Page 84, Paragraph 3.208): Could you introduce your IP support to SMEs in order to promote a domestic innovation?
Reply: Office of the Development Commissioner (MSME), Ministry of MSMEs is implementing a scheme "Building awareness on Intellectual Property Rights for MSMEs", under NMCP schemes. Under the scheme this office is extending IP support to SMEs in order to promote domestic innovation. The guidelines of the said scheme is available on the official website of this office i.e. http://www.dcmsme.gov.in.
3.3.5.2 Patents
Question 15 (Page 85, Paragraph 3.213): The Secretariat Report mentions that "the backlog of patent applications is growing." In this regard, kindly indicate any measures which have been or will be undertaken by the Government of India to address this issue, including:

1. 
   Measures to reduce the backlog,
   

Reply: With a view to speed up the disposal of patent applications, additional 252 posts of Examiners and 76 posts of supervisory officers (Controllers) have been approved by the Government in the 12th Plan. The Government is making all out efforts to complete the recruitment of all the vacant posts of Examiners and Controllers in the current year itself.

2. 
   Rules, regulations, guidelines or any other legal instruments to expedite the examination procedure of certain applications which require earlier processing and patenting,
   

Reply: There is no accelerated examination system for patent application in the IP Office at present. However, all pros and cons of the issue including possible fallouts of introducing the accelerated examination system in view of the country's patent system is under study.

3. 
   Other measures relevant to the issue.
   

Reply: Besides, as a short-time measure, 263 Contract Examiners of Patents (equally qualified as regular Examiners) are also being recruited and their process of selection is ongoing. Further streamlining the functioning of Patent Office by simplifying the patent procedures and regulations along with more automation and IT enablement in the patent work-flow has been accorded top priority
Question 16 (Page 86, Paragraph 3.216): India's Patent Act section 3(d) sets a different standard for pharmaceutical /chemical products from other industrial fields. Could India explain the consistency with the non-discriminatory principle declared in TRIPs 27.1?
Reply: Section 3(d) applies to all fields of technology and is therefore compliant with TRIPS 27.1.

As per section 3(d) of the patents Act, efficacy requirement is invoked when the subject matter involves "mere discovery of a new form of a known substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus". Unless the requirement of the efficacy is met with, a new form of a known substance or mere use of a known process, machine or apparatus is not an invention -meaning thereby that the criteria of patentability are not fulfilled. Thus, the efficacy requirement is the inventive step.

Question 17 (Page 86, Paragraph 3.216): The Secretariat Report mentions that in the judgment of the Supreme Court of India "it was said that 'efficacy' should be understood as 'therapeutic efficacy', which must be judged 'strictly and narrowly'". Could India clarify the consistency between this interpretation and the above mentioned principle in TRIPs 27.1?
Reply: The decision of the Supreme Court of India is consistent with the commitments under Article 27.1 of the TRIPS Agreement.
The provision Section 3(d) applies to all fields of technology. As per section 3(d) of the patents Act, efficacy requirement is invoked when the subject matter involves "mere discovery of a new form of a known substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus". Unless the requirement of the efficacy is met with, a new form of a known substance or mere use of a known process, machine or apparatus is not an invention -meaning thereby that the criteria of patentability are not fulfilled. Thus, the efficacy requirement is the inventive step.
The Hon'ble Court states in this regard that "efficacy means the ability to produce a desired or intended result. Hence the test of efficacy in the context of section 3(d) would be different depending upon the result the product under consideration is desired or intended to produce. In other words, the test of efficacy would depend upon the function, utility or the purpose of the product under consideration. Therefore, in the case of a medicine that claims to cure a disease, the test of efficacy can only be 'therapeutic efficacy'."

Question 18 (Pages 86-87, Paragraph 3.217): In the report, it was noted that a very specific type of product (a breakthrough innovative pharmaceutical product) suffered from 3(d) rejection. Could India elaborate on the efficacy standard of 3(d) in the case of protecting such a breakthrough innovation?
Reply: The reference in the paragraph relates to the drug "Sovaldi" used for treatment of Hepatitis C.
The application filed by the concerned company was rejected by the Controller after examination of facts. However, the applicant had appealed in the High Court of Delhi and the case has since then been remanded back to the patent office by the Hon'ble Court. Therefore there is no decision yet on the case.
However, it may be stated that the provisions in Indian Patents Act including those for patentability as mentioned under section 2(1)(j) and the exclusions from patentability as mentioned in section 3 and 4 are completely TRIPS compliant. During examination of applications, these criteria are applied equally to all types of inventions including breakthrough innovation. If any breakthrough innovative pharmaceutical product was rejected under section 3(d), as alleged, it must have been on the merits and on application of the relevant provisions in the Patents Act without any sort of discrimination. The legal regime in India provides the avenue to the applicant to appeal the decision with which it is aggrieved in the Intellectual Property Appellate Board or under Writ in the High Court.
Question 19 (Page 87, Paragraph 3.218): The Secretariat Report notes that India's first Compulsory License had been issued under the Patent Act, Sec 84. Sec 84 requires "not worked in the territory of India". Could India explain the relationship between this wording and TRIPs 27.1?
Reply: Article 27 relates to patentable subject matter and states that patents shall be available in all fields of technology provided they are new, involve an inventive step and are capable of industrial application. The issue in question relates to "Nexavor" which is an existing patent in India. The patent was given after evaluating it against the Indian patent law which is compliant with TRIPS Article 27.
However, Article 31 of TRIPS allows members States to issue compulsory license. Article 31 concerns only those inventions on which a patent has been granted. The authorizations are to be considered on individual merits. In addition Article 8 of TRIPS mandates countries to adopt measures to protect public health and nutrition and the Doha declaration on TRIPS and Public Health clearly states that WTO member States are free to set down conditions to enable issue of compulsory license. Section 84 of the Patent Act is therefore compliant with Articles 8, 31 and the Doha declaration. Since it can only apply after the patent has already been granted, it is erroneous to link Art 27.1 with Section 84 of the Patent Act.
In keeping with the provision, India's section 84 sets down conditions when such a grant of compulsory license could be considered. The Compulsory license was issued in the case of "Nexavor" as it did not meet the reasonable requirements of the public, was exorbitantly priced and was not worked in the territory. The interpretation of the term "working of the patent" has been given by the Intellectual Property Appellate Board (IPAB) in the Bayer Vs Natco case and has been upheld by the Hon'ble High Court.(this decision has been explained in detail in Q39 raised by Mexico, may not be required here because the import of the question is different).