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

Part I. Questions based on Report by the Secretariat (WT/TPR/S/313)

1. ECONOMIC ENVIRONMENT

2 . TRADE AND INVESTMENT REGIME

2.4 Investment Regime
Page 31, Para 2.30.
"Ministry of Commerce and Industry (DIPP) indicates that some 16 steps must be completed before an investor can establish a company. ...To streamline the process, the Government through the DIPP is establishing "eBiz", a web-based portal which is a one-stop shop for delivery of services to investors by the Government which is expected to address the needs of business from inception through its lifecycle. This is expected to significantly reduce the amount of time and money spent by investors in obtaining licences to start a business. According to the September 2014 "Make in India" initiative of the new Government, all Central and State Government departments and ministries were expected to be integrated in eBiz by end-2014. ..."
Question1: To what extent will the initiatives of "Make in India" and "eBiz" reduce the amount of time and streamline the procedures for examination and approval? What are the expected results of implementation?
Reply: The eBiz portal with a facility to obtain information on the number of permission/approvals required to be obtained for starting a business from Central, State and para-statal Governments is operational. Also, the eBiz platform with a provision to apply online for a Central Government service, pay online, re-submission in case of deficiency(ies), status tracking and SMS functionality is also operational with 14 Central Government services. The integration of 12 additional services are in advanced stages. In addition, the integration of 5 additional central Government services and roll-out of 24 state Government services in the pilot states of Delhi, Odisha, Rajasthan, Maharashtra, Tamil Nadu, Punjab, Haryana, Uttar Pradesh and West Bengal has commenced and the same is at various stages of implementation. Thus, the portal is currently operational with 14 Central Government services and is expected to be fully operational along with State Government services during the year. It will lead to reduction in time and cost.
Page 31, Table 2.3 Industries for which industrial licences are compulsory, 2014.
Cigars and cigarettes of tobacco and manufactured tobacco substances (new licences for which have been discontinued since 1999 on health grounds)
Question 2: Please enumerate the government regulatory authorities whose special licensing is required before one can engage in the processing of tobacco products. Are there any special restrictions imposed on non-residents of India as to the obtaining of such licensing?
Reply: Under I (D&R) Act, 1951 the manufacturing activity pertaining to Cigars and cigarettes of tobacco and manufactured tobacco substitutes is one of the compulsory licensable items. However, since 1999 no Industrial Licence has been issued by this Department for manufacture of Cigarettes, Cigars, cheroots, Cigarillos on health ground. Presently, Foreign Direct Investment is prohibited in manufacture of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
Page 32, Para 2.36.
India's foreign investment policy has been consolidated in the Circular on Consolidated FDI Policy which is updated every year by the DIPP; the latest version available has been updated up to 17 April 2014.
Question 3: Please further elaborate on the main revisions made to the Circular on Consolidated FDI Policy? Have the restrictions for foreign investment in the railway and architecture sector been relaxed?
Reply: India's foreign investment policy has been consolidated in the Circular on Consolidated FDI Policy read with relevant sectoral guidelines. The FDI Policy is updated every year by the DIPP; the latest version available has been updated up to 12 May, 2015 and details can be seen at the department's website.
Policy on rail infrastructure through Domestic and Foreign Direct Investment has also been liberalized, permitting 100% FDI under the automatic route in construction, operation and maintenance of specified rail infrastructure projects.
In architecture services, FDI is allowed, subject to sectoral guidelines and relevant regulations of Council of Architecture.
Page 34, Para 2.43.
"A number of investment incentives are provided both by the central and State Governments to encourage investment in certain regions or activities (Section 3.3.1). In September 2014, the Government launched the "Make in India" programme which encourages investment in industry and services"
Question 4: Please introduce the investment incentives under the "Make in India" programme, the expected schedule of implementing these incentives, and the differences in their implementation among various states and autonomous regions?
Reply: The "Make in India" initiative does not have any financial incentives build in it. A number of administrative ministries, as well as, Ministry of MSME are providing financial incentives to new and existing units. These incentives for 25 thrust sectors are provided on web site http://makeinindia.com. Government of India is already working on all pillars of "Make in India" initiative by simplifying regulation, creating infrastructure and opening up economy for FDI. A number of initiatives have been taken to improve Ease of Doing Business. FDI has been liberalized in Defence, Construction, Medical Devices, Railway Infrastructure and Insurance Sectors.
3.TRADE POLICIES AND PRACTICES BY MEASURE

Page 73, Para 3.153.
"With a view to promoting trade and investment, the Exim Bank provides Indian exporters with export credits on a cost-plus basis at market-related interest rates. The Exim Bank also provides finance and export support to EOUs (in the form of loans, working capital marketing support, export product development, export facilitation, and import finance) and value-added services (e.g. advice and marketing services aimed at evaluating international risks and export opportunities). .."
Question 5: In providing export credits, does the Export-Import Bank of India apply the same term and interest rate as other financial institutions engaged in the business? Does the government grant policy subsidies or support to the Export-Import Bank of India when the latter provides credits?
Reply: Exim Bank, in terms of its legislative charter, is required to be run on business principles with due regard to the public interest. The Bank is profitable, having recorded a post-tax profit in every year of its existence, and also pays every year a return on capital to the Government of India @ 10% of its average paid up capital. Export credit is provided to Indian exporters by Exim Bank and other commercial banks, at market related interest rates. While there are no administered interest rate mechanisms in India for export credit, interest rates are derived by Exim Bank, as well as the commercial banks, based on resource cost, risk perceptions and internal risk-pricing models.
The Government of India does not grant policy subsidies or support to the Export-Import Bank of India when it provides credits to Indian exporters.
Question 6: Are fees charges for the "value-added services (e.g. advice and marketing services aimed at evaluating risks and export opportunities)" mentioned here?
Reply: The advisory and marketing services are provided on fee basis.
Question 7: Export-Import Bank of India 是否有专门机构来评估风险及出口机会？
Is there any department in the Export-Import Bank of India dedicated to the evaluation of risks and export opportunities?
Reply: There is no single department but rather a combinatorial approach. The Bank has a dedicated Research and Analysis Group which evaluates potential opportunities at macro level, and a Marketing Advisory Services Group, which are primarily engaged in providing value-added services at firm level. However, the fee-based advisory services are provided drawing expertise from other departments as well, on need basis. The Bank's Risk Management Group evaluates the risk profile of opportunities from a strategic and organizational point of view.
Page 73, Para 3.154.
"The Exim Bank also provides various export guarantee schemes and fee-based services to support international trade and investment, and conducts related research."
Question 8: What specific support measures does the Export-Import Bank of India provide? What is the share of the Bank's support to relevant business in its total business volume?
Reply: In addition to the funding support, Exim Bank of India provides non-funded support, such as issuance of performance guarantees, financial guarantees, advance payment guarantees, retention money guarantees, letters of credit etc. The non-funded support accounts for about 11% of total customer business volume (loans + non-funded support) as on March 31, 2015.
Page 73, Para 3.157.
"Insurance against export credit risk is provided by the ECGC Limited (formerly known as the Export Credit Guarantee Corporation of India Ltd.)... ...The National Export Insurance Account (NEIA), operated by ECGC, covers export credit risk for large, medium- and long-term overseas projects that are deemed commercially viable and strategically important from an economic and political point of view, but fall beyond ECGC's underwriting capacity and are not backed by reinsurance. Under the NEIA scheme, 22 projects with a value of around Rs 170.7 billion were covered."
Question 9: Regarding ECGC, the government institution providing insurance against export credit risk, and the NEIA operated by ECGC, please elaborate on the conditions for an project to be incorporated into the NEIA (e.g.: commercial viability, strategic importance from an economic and political point of view, exceeding ECGC's underwriting capacity or what?).
Reply: The criteria needed to be fulfilled to receive NEIA support are as follows:
i.The project by itself should be commercially viable. In NEIA those projects are supported where the exporter should be expected to earn profits and done on commercial terms.

ii.The project should be strategically important for India, with regard to the economic and political relationship of India with the project country.

iii.(iii)The exporter should be capable of executing the contract, as shall be evident from his previous track record. The capability of the exporter is assessed to ensure that he has the necessary expertise for executing the project.

iv.ECGC is not able to cover the project on its own, due to its underwriting capacity constraints. It is difficult to cover risks taking into account the long repayment period, the large value of the contracts, the difficult economic and political conditions of the country and the fact that the commercial reinsurance cover is generally not available in such cases.

Question 10: Do the same terms apply to the projects within the NEIA and ordinary ones in an insurance (particularly in terms of the criteria for insurance approval and the rates)?
Reply: The assessment and appraisal of the project viz. project risk, country risk, buyer risk is the same whether the project is covered under NEIA or under ECGC. The method and parameters of assessment will be similar; however, the rates may be different. For ECGC cover, we fix the premium rate according to the country grouping and the length of credit. Under NEIA, for covers where NEIA offers guarantees to ECGC, the rates are as per ECGC premium schedule.
Question 11: Does ECGC provide credit insurance products for spot exchange engineering projects within 1 to 3 years? Can this kind of insurance policy be used by exporters for fundraising?
Reply: ECGC does not have any policy for such transactions.
Question 12: When an exporter plays both roles of an investor and a building contractor, what's the optimal mix of ECGC policy products for full-risk coverage for an exporter?
Reply: When an exporter invests in a joint venture abroad, ECGC offers overseas investment insurance covering political risks only. In case the exporter also executes supply contracts or construction contracts, ECGC will cover such receivables separately under its policy for covering receivables under such a contract against comprehensive risks.
Page 73, Para 3.159.
"Direct or explicit subsidies as reported in the Central Government's Annual Budget amounted to Rs 2,667.0 billion (2.1% of GDP) (Table 3.18). The bulk of India's explicit subsidies continue to be aimed at supporting agriculture, promoting food security and reducing poverty. Most of the outlays are allocated to food, fertilizers and petroleum. Food subsidies are provided by the Department of Food and Public Distribution to meet the difference between actual prices and the central-issue prices fixed under the Targeted Public Distribution System (TPDS) and other welfare schemes. The central Government also provides a subsidy to the Food Corporation of India to keep buffer stocks of wheat and rice as a food-security measure."
Question 13: Are there any incentives for the pharmaceutical industry in India, particularly are their corresponding support policies for the biomedicine industry? Please elaborate if any.
Reply: No subsidies are being provided to the pharmaceutical industry in India.
Question 14: Please clarify whether the foreign investor can directly invest in the essential medical corporations? Please provide a list of the essential medical corporations?
Reply: As per the existing Foreign Direct Investment Policy, all investments in Brownfield pharmaceutical companies are through Government approval route and government while approving the investment may consider imposing certain conditions on a case to case basis.

There is no essential medical corporation in India. The pharmaceutical companies are mainly in the private sector which produces different sets of essential medicines which are sold in the domestic market at prices equal to or lower than those fixed by the National Pharmaceutical Pricing Authority (NPPA).

3.1.1 Customs procedures and requirements
Question 15: The Indian Customs adopts the systems of self-assessment by enterprises and risk management. Does this policy apply to the exporting enterprises that need to obtain an license? How is the Customs' regulation conducted?
Reply: Yes, self-assessment is mandatory for all exporters. Every exporter is required to self-assess the duty and the same may be verified by proper officer of Customs. In case of any discrepancy, the assessment made by exporter may be re-assessed by the officer of Customs.

3.3.2Competition policy and price controls
Page 76, ,Para3.170.
The Competition Commission of India (CCI), established under the CCI Act 2002, is responsible for preventing practices having an adverse effect on competition, promoting and sustaining competition in markets, protecting the interests of consumers and ensuring freedom of trade carried out by other participants in the markets in India. It has powers of inquiry and enforcement, and may impose penalties for non-compliance with its procedures. The CCI may also take remedial actions to deal with anti-competitive agreements and abuse of dominant position, and impose penalties of up to 10% of the average turnover of an enterprise for the three preceding financial years.
Question 16: Please introduce the main functions and the internal organization of CCI. How is "average turnover of an enterprise for the three preceding financial years" determined?
Reply: The main functions of CCI are to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers, and ensure freedom of trade carried on by other participants, in markets in India.
As per the Competition Act, the Competition Commission of India (CCI) shall consist of a Chairperson and not more than six other Members to be appointed by the Central Government. There are various Divisions headed by the Advisors to help the Commission in carrying out its activities. These Divisions are Anti-Trust Division, Economic Division, Legal Division, Combination Division, Investigation Division, Advocacy Division and Capacity Building & International Cooperation Division. The CCI also has a Secretariat headed by the Secretary which acts as a link between the Commission and the outside world. To undertake investigation of various alleged cartel and abuse of dominance cases, there is a separate investigating arm in the form of office of Director General.
As per the Act, average of the turnover for the last three preceding financial years is to be considered. Turnover includes value of sale of goods or services.
Page 77, Para 3.170.
The authorities state that the CCI is an independent body; it has full functional autonomy as a competition regulator in India, furnishes its annual report which provides a full account of its activities to the Government, and is subsequently placed before the Parliament.
Question 17: Does CCI coordinate with other competent government authorities when reviewing M&A cases and how? What impact will the views of other authorities have on the decisions of the competition regulator?
Reply: While reviewing M&A cases CCI may take opinion of other Statutory/government authorities/sectoral regulators, if need arise. However, opinion given by Statutory/government authorities is not binding on the CCI.
Page 77, ,Para 3.171.
Legislation dealing with competition issues in India includes the Competition Act 2002, the Competition (Amendment) Act 2007, the Competition (Amendment) Act 2009, and various regulations issued by the CCI.
Question 18: Please introduce the procedure for amending the Competition Act.
Reply: Competition Act is a central government (federal) Act. Like any other central government Act, the Competition Act can also be amended in a manner as prescribed in the Constitution of India. To amend the Competition Act, an amendment bill may be introduced in any house of the parliament. Once, both houses of parliament passes the bill, it goes to the President of India for his assent. After the assent of the President of India, the amendment bill becomes an Act. The Act is notified by the Central government. Provisions of the Act become operational from the date of notification, unless otherwise mentioned.

Page 77, para. 3.172.
The purpose of the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations 2011 is to provide detailed procedures to be followed in case of combination matters (e.g. merger review).
Question 19: Does simple procedure apply to M&A review in India? What are the criteria for its application? What is the proportion of the cases subject to simple procedure in the total?
Reply: As per the Act, any Combination (M&A), which is not specifically excluded within the provisions of the Act or Regulations and which is above the threshold limit as prescribed under the Act, must be notified to the CCI. To facilitate timely approval of Combination cases, the Act provides for a maximum period of two hundred and ten days within which a proposed Combination gets approval. However, CCI has a self –imposed limit to clear cases within 180 days on best endeavour basis. As per provisions in CCI (Procedure in Regard to the Transaction of Business Relating to Combination) Regulation, 2011 ("Combination Regulations"), the Commission has to form a prima facie opinion on appreciable adverse effect on competition (AAEC) within 30 days and only those cases in which the Commission has prima facie AAEC concern(s), a detailed investigation is carried out. However, so far detailed investigation has been carried out only in respect of two cases out of 258 combination notices finalised by the Commission till date (18 May 2015).
All combinations (M&A) cases which are notified to the CCI are subject to the same procedure as mentioned in the Combination Regulations. The Regulations detail the procedure relating to filing, filing fees, forms to be used, time limits etc. and also as to how a proposed Combination case is dealt within the CCI.
Page 77, para. 3.175.
Between May 2009 and December 2014, the CCI received 557 cases (excluding combination filings as described in the next paragraph). As at 31 December 2014, 283 cases (out of 557 cases) were closed at the prima facie stage…. in the same period, there were 58 cases (including combination cases) where penalties were imposed, the total amount of the penalty amounting to Rs 124.7 billion.
Question 20: Please introduce some cases typical in nature or with big social impact, particularly those involving international cartels.
Reply: CCI has not dealt with any international cartel so far. Few of the cases dealt by CCI which have social impact or are typical in nature belong to pharmaceuticals, energy, automobiles and real estate sector. All the Orders passed by the CCI are available at www.cci.gov.in.
Page 384, para. 3.207.
India's National Manufacturing Policy, while defining the functions of the Technology Acquisition and Development Fund, has stated that the Fund will have the option to approach the Government for issue of a Compulsory Licence for the technology which is not being provided by the patent holder at reasonable rates or is not working in India to meet the domestic demand in a satisfactory manner.
Question 21: Is the Technology Acquisition and Development Fund a government institution or a private one? Can the Fund directly approach the Government for issuing a Compulsory License as a petitioner? What other functions does the Technology Acquisition and Development Fund have?
Reply: TADF is being managed by Global Innovation and Technology Alliance (GITA) which has been promoted jointly by CII and Department of Science and Technology. The functions of the TADF have been explained in Chapter 4 of the National Manufacturing Policy.
Page 85, para. 3.214
This was subsequently followed by the implementation of a Plan Scheme for "Modernization &Strengthening" of IP Offices (2007-11). Under the scheme, new posts of patent examiners/controllers have been created. Procedures were also streamlined and at present the functioning of the IP Office is completely e-enabled. However, due to high attrition rates and the time-lag involved in recruitment, the situation of applications pending did not really improve. The scheme has been continued in the Twelfth Plan (2012-17).
Question 22: How long does the examination of a patent application with the IP Offices take on average? In addition to recruitment and e-enabling the IP Office, what other measures has the IP Office adopted to improve the examination efficiency and reduce the backlog of applications in its Twelfth Plan (2012-17)? Have measures been taken to tackle the leaving of examiners and their recruitment?
Reply: At present, the examination of applications is done in 35-75 months from the time of receipt of the Requests for Examination depending upon the Group of Examination and Patent Office locations.
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 12^th 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.

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 inculcating more automation and IT enablement in the patent work-flow has been accorded top priority.

With this enhanced manpower and the measures initiated by the office for better functioning including further automation ,it is expected that the pendency of applications (pendency of requests of examinations) will reduce to the level of about 24 months from the date of filing request of examination.
Question 23: Is there an accelerated examination system for patent application in the IP Office? If not, does the IP Office consider establishing such a system?
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.
4 TRADE POLICIES BY SECTOR

4.1 Agriculture
Page 102, Table 4.2 Agriculture sector schemes/programmes, 2014
Question 24: Regarding the RKVY program, please explain how the government is promoting public investment in agriculture. Does the government provide preferential loan to private entities? Does the government have different incentives for investing in different agricultural products?
Reply: Rashtriya Krishi Vikas Yojana (RKVY) which was launched in 2007-08, aims at enhancing public investment in agriculture with active participation of federal States and their district administrative units. To enhance public investment and sustain agricultural growth , the States are required to prepare district and state specific agriculture plans each year for creation of agri- infrastructure depending on the priorities and agro-climatic requirements.
The Government does not provide any performance loans to private entities under RKVY. There is no provision for providing different incentives for investing on different agri-products as RKVY is a project based scheme. The selection, prioritization and implementation of activities within the projects of RKVY are decided by the schemes implementing States.
Question 25：Please explain the operational details on input subsidies for fertilizers, power, water and seed. Does the government provide fund to farmers to pay for fertilizers, power and water, provide reimbursement or give fertilizers to farmers for free?
Reply: The government does not provide funds to the farmers. Generally these inputs are provided to farmers at concessional rates , with the producer getting the price differential from the government.
Question 26: Apart from input subsidies, are there any other internal support programs accounted for the "Development Box" in Agricultural Agreement? If so, please explain how these programs work.
Reply: A few small programmes such as improvement/breeding of livestock and poultry, loan under tea development, programme for replanting of senile and uneconomic cardamom gardens, small farmers development assistance by Spices Board are also included in the "development box". These programmes are intended to address the specific development needs of farmers in various sectors.
4.4.1 Financial services

Page 118, Table 4.6 Securities market, 2012-15
Question 27: The table shows that on October 31, 2014, the turnover of the Indian currency derivatives decreased from 1.1615 trillion dollars of the previous period to 446.7 billion dollars. What are the main reasons for such a drastic decrease?
Reply: The turnover of 1.1615 trillion dollars is for the full year (financial year 2013-2014); whereas the turnover of 446.7 billion dollars is for seven months period (April 01, 2014 – October 31, 2014). This is the main reason for the drastic decrease in figures.

 

4.4.2 Telecommunications

Page 121, Para 4.102
Question 28: In April 2011, the Telecommunications Regulatory Agency of India (TRAI) issued proposals to promote domestic telecom equipment manufacturing. The proposals called for, inter alia, a certain percentage of telecom equipment be procured from India. Are these proposals implemented? What steps are needed for the policies recommended to become law and be enforced? How will India ensure their consistency with India's trade obligations and regulations?
Reply: Government has notified policy for preferential market access for domestically manufactured electronics products in Government procurement or projects funded by Government consistent with WTO obligations.