Trade policy review report by the secretariat


Measures Affecting Production and Trade



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Measures Affecting Production and Trade

  1. Incentives

    1. Tax incentives


          1. India provides various tax incentives to promote selected economic activities. For example, under the Income Tax Act 1961, tax incentives are provided to: shipping companies (Section 33AC of the Act); revenue and capital expenditure on scientific research (Section 35); specified business (Section 35AD), and certain industrial undertakings (Sections 80IB and 80IC). India publishes statements of revenue forgone in its annual central government budgets.127
    2. Explicit subsidies


          1. 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.

Table 3.28 Explicit subsidies, 2012-16

(Rs billion and %)






2012-13a

2013-14a

2014-15b

2015-16c

Total

2,570.8

2,546.3

2,667.0

2,438.1

Fertilizer subsidy

25.5

26.4

26.6

29.9

Imported (urea) fertilizers

5.9

4.5

4.5

5.0

Indigenous (urea) fertilizers

7.8

10.4

14.3

15.7

Decontrolled fertilizers

12.0

11.5

7.7

9.2

Food subsidy

33.1

36.1

46.0

51.0

Petroleum subsidy

37.7

33.5

22.6

12.3

Interest subsidies

2.8

3.2

4.2

6.1

Other subsidies

0.9

0.7

0.6

0.6

a Actual expenditures.

b Revised budget.

c Budget.

Source: Government of India online information. Expenditure Budget Vol.1 2013-14 and Expenditure Budget Vol.1 2014-15. Viewed at: http://indiabudget.nic.in/budget2013-2014/ub2013-14/eb/stat04.pdf, and http://www.indiabudget.nic.in/ub2015-16/eb/stat04.pdf.



              1. India's latest notification on fisheries subsidies covering the information for 2010-11 to 2013-14 was submitted to the WTO in November 2014.128 The authorities state that various subsidies under the centrally-sponsored scheme for development of marine fisheries are mainly aimed at improving socio-economic conditions of poor and traditional coastal fishermen by way of upgrading their skills with improved craft and gear and ensuring safety at sea; these subsidies are provided to upgrade fishing capacity for optimum utilization of available fisheries resources, rather than creating overcapacity, as well as ensuring the sustainable livelihood of poor and traditional fishermen, enabling/encouraging them to decongest coastal waters by moving from near-shore to deep sea to unexploited or underexploited fishery resources. The authorities consider that the amount of subsidies provided to the sector is very small compared to most other countries.

              2. India submitted 35 notifications regarding subsidies to the Committee on Subsidies and Countervailing Measures. These include India's responses129 to questions raised by other Members.130

              3. India adopted the National Food Security Act 2013 in September 2013 with a view to providing subsidized food grains to around two-thirds of its population (Section 4.1.1.3).
        1. Credit policies


              1. The central Government allocates funds to subsidize interest rates, including for exporters (Table 3.19).131 Under these schemes, which are managed by different ministries (e.g. Ministry of Finance, and of Heavy Industries and Public Enterprises), central public sector enterprises (CPSEs) also have access to credit at preferential rates.

Table 3.29 Preferential interest rates to exporters, 2014

Period

Sector

Interest rate

Subsidy

Floor rate

1 December 2008 to 31 March 2014

Textiles (including handloom), handicrafts, carpets, leather, gems and jewellery, marine products, and SMEs

2 percentage points

7%

1 April 2010 to 31 March 2011

Handicrafts, carpets, handlooms and SMEs. From 1 August 2010, leather and leather manufacturers, jute manufacturing including floor coverings, engineering goods and textiles

2 percentage points

7%

1 April 2011 to 31 March 2012

Handicrafts, handlooms, carpet and SMEs

2 percentage points

7%

1 April 2012 to 31 March 2013

Handicrafts, carpets, handlooms, SMEs, readymade garments, processed agriculture products, sports goods, toys

2 percentage points

7%

1 April 2013 to 31 March 2014

Handicrafts, carpets, handlooms, SMEs, ready‑made garments, processed agriculture products, sports goods, toys, certain ITC and textile goods, and 235 tariff lines on engineering goods

Up to 31 July 2013, 2 percentage points. From 1 August 2013, 3 percentage points.

7%

Source: WTO Secretariat, based on information provided by the Indian authorities.

              1. India sets targets for priority‑sector lending to ensure that banks provide credit to specific sectors.132 Domestic and foreign commercial banks are required to reserve a percentage of their adjusted net bank credit (ANBC) or credit equivalent amount of off‑balance‑sheet exposure (OBSE), whichever is higher, for priority sectors. Domestic banks and foreign banks with at least 20 branches must reserve 40% of their ANBC/OBSE for lending to priority sectors, and foreign banks with less than 20 branches 32% of their ANBC/credit equivalent of OBSE (Table 3.20). In 2013-14, 16 of the 26 public banks, 16 of the 20 private domestic banks, and 38 of the 39 foreign banks met the target.133

Table 3.30 Targets for lending to priority sectors, 2014

Priority sectors

Domestic commercial banks/foreign banks with at least 20 branches

Foreign banks with less than 20 branches

Total priority sectors

40% of the adjusted net bank credit (ANBC) or credit equivalent amount of off‑balance‑sheet exposure (OBSE), whichever is higher

32% of ANBC or credit equivalent amount of OBSE, whichever is higher

Agriculture

18% of ANBC or credit equivalent amount of off‑balance‑sheet exposure, whichever is highera

No specific target

Micro- and small enterprises (MSEs)

Advances to MSEs sector will be reckoned in computing achievement under the overall priority sector target of 40% of ANBC or credit equivalent amount of off‑balance‑sheet exposure, whichever is higher

No specific target

Weaker sectionsb

10% of ANBC or credit equivalent amount of off‑balance sheet exposure, whichever is higher

No specific target

a Indirect lending in excess of 4.5% of ANBC or credit equivalent amount of off-balance sheet exposure, whichever is higher, will not be reckoned for computing achievement under the 18% target. However, all agricultural loans under the categories "direct" and "indirect" will be reckoned in computing achievement under the overall priority sector target of 40% of ANBC or credit equivalent amount of off-balance-sheet exposure, whichever is higher.

b Weaker sections include, inter alia, small and marginal farmers; artisans, and village and cottage industries; scheduled castes/scheduled tribes; and beneficiaries of the Differential Rate of Interest (DRI) Scheme.



Source: WTO Secretariat, based on information provided by the Indian authorities.

              1. Subsidies are also provided to regional rural banks, cooperative banks, and public sector banks to provide short‑term credit to farmers at preferential rates. Apart from this subsidy granted by the central Government, farmers may benefit from other subsidized interest rates at the State level.
        1. Micro- and small enterprises


              1. India provides support to micro- and small enterprises (MSEs) through various means, for example, by reserving some products for exclusive manufacturing by MSEs. Products are eligible for reservation if manufacturing by MSEs is economically viable and technically feasible.134 The reservation/de‑reservation of products is reviewed regularly by the Advisory Committee on Reservation, under the Ministry of Micro, Small, and Medium Enterprises (MSMEs). Currently, 20 products are in the reserved category (unchanged since India's previous Review).135

              2. The Government provides a number of other assistance schemes to MSEs; these schemes are managed by the Ministry of MSEs and supporting institutions (e.g. the Office of the Development Commissioner and the National Small Industries Corporation). They aim to assist MSEs in the promotion and marketing of exports, product certification, technology upgrading, and human resources development (Table A3.1). MSEs are also granted preferences in government procurement (Section 3.3.4).

              3. Within the policy on lending to priority sectors, advances by domestic commercial banks or foreign banks with no fewer than 20 branches to micro- and small enterprises will be counted towards the overall priority sector target of 40% of ANBC or credit equivalent amount of off‑balance-sheet exposure, whichever is higher.

              4. At the State level, other schemes also implemented to support the development of MSEs include: the development of industrial estate, tax incentives, and subsidies for electricity and capital.136 Under the General Excise Exemption Scheme, MSEs with annual turnover of up to Rs 40 million are granted full excise exemption up to Rs 15 million137; MSEs may also benefit from excise duty exemptions.138
      1. Competition policy and price controls

        1. Competition policy


              1. 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.139 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. In the case of a cartel, the CCI may impose on each member a penalty of up to three times the profit or up to 10% of turnover, whichever is higher, for each year of the continuation of the agreement. After the inquiry, the CCI may issue a cease-and-desist order directing a delinquent enterprise to discontinue and not to re-enter into an anti-competitive agreement or abuse its dominant position. The CCI may self-initiate investigations. The CCI provides ex ante merger consultation free of charge. The CCI also has a role in competition advocacy; the authorities consider it necessity to develop "competition culture" in the economy, and enhance competition compliance by stakeholders. The CCI has organized various workshops, conferences, seminars, used electronic media and undertaken studies in pursuance of the advocacy mandate. The orders, directions or decisions made by the CCI may be appealed before the Competition Appellate Tribunal (CAT). 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. The chairperson and members are appointed by the Government from a panel of names recommended by a selection committee headed by the Chief Justice of India or his/her nominee. The appointments are subject to their satisfying the qualifications and experience requirements stipulated in the Competition Act 2002.

              2. 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.140 Sector-specific regulations exist in many sectors, such as capital markets, insurance, telecommunications, electricity, petroleum and natural gas, and civil aviation. The Competition Act does not distinguish between private and government enterprises except for limited exemptions relating to sovereign functions of government (including activity relating to energy, currency, defence and space). The Competition Act stipulates mandatory prior approval of combinations above the notified thresholds.141 The CCI must decide within 210 days to finalize and notify the decision on a combination filing. In this context, the CCI has a self-imposed limit to clear cases within 180 days on best-endeavour basis. As per provisions in "Combinations Regulations", the authorities consider that most filings are likely to be approved within 30 days and only those with serious competition concerns are likely to go beyond this period to the second stage of investigation.

              3. In June 2011, two new regulations concerning combinations (mergers) and recovery of monetary penalty, respectively, entered into force.142 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). The Regulations deal with, inter alia, the form of notice to be given, timelines, filing fees, procedure for filing notice. Combinations require filing notices within 30 days of: (i) approval of the proposal relating to merger or amalgamation; or (ii) execution of any agreement or other documents of acquisition. The CCI (Manner of Recovery of Monetary Penalty) Regulations 2011 contains, inter alia, detailed provisions with regard to issuance of demand notices, modes of recovery, reference to income tax authorities, and interest on penalties. The purpose of the Regulation is to enforce penalty recovery in an effective and pre-determined manner.

              4. The authorities state that CCI has kept the Combination Regulations aligned with international best practices, such as mandatory filing, clearly defining threshold for notification requirements, and timing of notices to be submitted. From this perspective, CCI amended the Combination Regulations on 23 February 2012, 4 April 2013 and 28 March 2014, respectively, with a view, inter alia, to simplifying filing requirements for combinations.143.

              5. In addition, in accordance with clause (a) of Section 54 of the Competition Act, the Government exempted: (i) an enterprise, whose control, shares, voting rights or assets are being acquired has either assets of the value of not more than Rs 2.5 billion in India or turnover of not more than Rs 7.5 billion in India from the provisions of Section 5 of the Act for a period of five years from 4 March 2011; (ii) a banking company, to which the Government has issued a notification under Section 45 of the Banking Regulation Act 1949, from the application of provisions of Section 5 and 6 of the Competition Act for five years from 8 January 2013144; and (iii) the Vessel Sharing Agreements of Liner Shipping Industry from the provisions of Section 3 of the Competition Act (Anti-Competitive Agreements) for a period of one year as from 11 December 2013.

              6. 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, 144 cases decided/disposed of after the report of the Director General (DG) of Investigation, 55 cases under consideration before the CCI, and 75 cases under investigation before the DG. The CCI has issued cease-and-desist orders in various cases as well as ordered modification of agreements; between 2011 and 2014, 77 cease‑and‑desist orders were issued. Penalties have been imposed in some cases (e.g. a cartel involving cement)145; 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.

              7. On merger review, between June 2011 and March 2014, the CCI received more than 150 combination filings, all of which being cleared by the Commission at the first phase of scrutiny within 30 days of filing in accordance with the provisions of the Combination Regulations.

              8. The CCI identifies the Memorandum of Understanding (MOU) as a potent tool to enhance international cooperation in competition policies. It has signed MOUs with: the Federal Antimonopoly Service (Russia) in 2011; the Federal Trade Commission and the Department of Justice (the United States) in 2012; the Australian Competition and Consumer Commission in 2013; the DG Competition, European Commission in 2013; and Competition Bureau, Canada in 2014. In various regional trade agreements that India has signed (e.g. with Japan, and the Republic of Korea), competition chapters are included; the authorities state that all RTAs to be concluded by India are likely to have a chapter on competition.

              9. The authorities are currently formulating a National Competition Policy.146
        2. Price controls


              1. The Government maintains various price support schemes for agricultural commodities. These include minimum support prices (MSPs) for major agricultural commodities, price support schemes (PSS) involving procurement, the market intervention scheme (MIS) covering agricultural commodities that are not covered by MSPs, the fair and remunerative price (FRP) and the state advisory price (SAP) schemes for sugarcane. There is also a new pricing scheme (NPS) for urea.147 These schemes have remained largely unchanged since 2011.148

              2. Under the targeted public distribution system (TPDS), the prices of certain essential commodities (i.e. wheat, rice, coarse grains, sugar and kerosene) continue to be subsidized for a targeted population living below the poverty line.

              3. In addition, the prices of LPG for domestic use are controlled with the provision of subsidies. LPG for domestic use is made available at subsidized prices up to 12 cylinders per year per household. Price controls on petrol and diesel were abolished on 26 June 2010, and 19 October 2014, respectively.

              4. A two‑price regime system continues to exist for natural gas: gas priced under the administered pricing mechanism (APM) and non‑APM gas. The APM applies to gas produced in fields awarded to India's national oil companies (ONGL and OIL) prior to the implementation of the New Exploration Licensing Policy (NELP) in 1999. The non‑APM applies to: (i) gas produced in fields awarded under the NELP for which the price is determined by the production sharing contract (PSC) between the Government and the private contractor; and (ii) to imports of LNG for which the price is determined by an agreement between buyer and seller. The price formula used to determine the prices under the PSC must be approved by the Government. APM gas may only be used by priority sectors, i.e. fertilizers (urea), LPG plants (owned by GAIL and ONGC), power, city gas distribution, steel plants, refineries, and petrochemicals. Other consumers are not allowed to use subsidized gas and must buy it from private companies or LNG importers. The price of gas produced by ONGC and OIL under the APM was US$4.2/MMBTU prior to 1 November 2014, when it was increased to US$5.61/MMBTU (on net calorific value) to be valid until 31 March 2015, as per the prescribed formula reflecting international gas markets. Prices are to be revised every six months.

              5. The Government closely monitors the price of certain sensitive hydrocarbons. In case of high price volatility in the international market, the Government will intervene to stabilize prices.

              6. On 7 December 2012, the Government introduced the National Pharmaceutical Pricing Policy 2012, and subsequently the Drugs (Price Control) Order, reflecting the Policy, was issued on 15 May 2013.149 The objective of the Policy is to introduce a pricing framework for drugs to ensure availability of "essential medicines" specified in the National List of Essential Medicines at reasonable prices while providing sufficient opportunity for innovation and competition. Under the Policy, prices of some 348 essential medicines are regulated on the basis of formulations through "market-based pricing", which takes the simple averages of retail prices of all brands having a market share of no less than 1% of total market turnover.150 The ceiling price of scheduled formulations will be revised as per the annual wholesale price index (WPI) for the preceding calendar year on or before the first day of April every year and will be notified on the first day of April every year.
      2. State-owned enterprises, and privatization

        1. Role of state-owned enterprises (other than state-trading companies), and disinvestment


              1. Central public sector enterprises (CPSEs) continue to play an active role in the economy, holding significant market-share in several sectors/subsectors, e.g. petroleum and mining, power transmission and generation, nuclear energy, heavy engineering, the aviation industry, storage and public distribution system, shipping, insurance, and telecommunications.

              2. India's disinvestment policy is aimed at encouraging people-ownership of CPSEs while ensuring that the Government's equity does not fall below 51%, hence maintaining control of the enterprise. The Government's disinvestment programme in listed, profit-making CPSEs is governed by the Disinvestment Policy of November 2009, which aims to bring transparency and accountability in the day-to-day functioning of CPSEs and also to introduce market discipline. On 22 August 2014, the minimum public shareholding norm of CPSEs was raised from 10% to 25% to be achieved by end August 2017. In addition, the disinvestment programme envisages listing all unlisted profit-making CPSEs on stock exchanges; this will be achieved with the issue of fresh equity by the CPSE, or by the Government offloading its share in the stock market, or a combination of both.

              3. Since India's last Review, disinvestment of CPSEs has continued; a few CPSEs were recently approved for disinvestment (Table 3.21). Annual plans for disinvestment are approved by the Cabinet and included in annual budgets. Details of those companies to be disinvested and by how much are not published.

              4. At end-March 2014, 229 of India's 277 CPSEs were in operation.151

Table 3.31 Overview of disinvestment, 2011-15

CPSEs

Scenario

Year

Government's share (%)

CPSEs disinvested







Power Finance Corporation of India Ltd. (PFC)

Follow-on Public Offer (FPO). 5% along with 15% fresh equity raised by the company

2011-12

89.78

Oil & Natural Gas Corporation of India Ltd (ONGC)

Offer for sale of 4.91% of the Government's paid-up capital

2011-12

74.14

National Building Construction Corporation (NBCC)

Offer for sale of 10% of the Government's paid‑up capital

2012-13

100

Hindustan Copper Ltd. (HCL)

Offer for sale of 5.58% of the Government's paid-up capital

2012-13

99.59

National Mineral Development Corporation (NMDC) Ltd.

Offer for sale of 10% of the Government's paid‑up capital

2012-13

90

Oil India Ltd.

Offer for sale of 10% of the Government's paid‑up capital

2012-13

78.43

National Thermal Power Corporation (NTPC) Ltd.

Offer for sale of 9.50% of the Government's paid-up capital

2012-13

84.50

Rashtriya Chemical and Fertilizers Ltd (RCF)

Offer for sale of 12.5% of the Government's paid-up capital

2012-13

92.5

National Aluminium Company Ltd (NALCO)

Offer for sale of 6.09% of the Government's paid-up capital

2012-13

87.15

Steel Authority of India Ltd (SAIL)

Offer for sale of 5.82% of the Government's paid-up capital

2012-13

85.82

Hindustan Copper Ltd (HCL)

Offer for sale of 4.01% of the Government's paid-up capital

2013-14

94.01

ITDC Ltd

Offer for sale of 5% of the Government's paid‑up capital

2013-14

92.11

MMTC Ltd

Offer for sale of 9.33% of the Government's paid-up capital

2013-14

99.33

National Fertilizer Ltd (NFL)

Offer for sale of 7.64% of the Government's paid-up capital

2013-14

97.6

State-Trading Corporation Ltd (STC)

Offer for sale of 1.02% of the Government's paid-up capital

2013-14

91.02

Neyveli Lignite Corporation Ltd (NLC)

Offer for sale of 3.56% of the Government's paid-up capital

2013-14

93.56

Engineers India Ltd (EIL)

Offer for sale of 10% of the Government's paid‑up capital

2013-14

80.40

Indian Oil Corporation Ltd (IOCL)

Offer for sale of 10% the Government's paid-up capital

2013-14

78.92

National Hydroelectric Power Corporation (NHPC)

Buy-back of 10% by the Company

2013-14

86.36

Power Grid Corporation of India Ltd (PGCIL)

4% FPO and 13% of fresh equity raised by the Company

2013-14

69.42

Bharat Heavy Electric Ltd (BHEL)

Offer for sale of 4.66% of the Government's paid-up capital

2013-14

67.72

Steel Authority of India Ltd (SAIL)

Offer for Sale of 5% of paid-up equity capital of SAIL out of the Government's shareholding of 80%

2014-15

80

Coal India Ltd. (CIL)

Offer for sale of 10% of the Government's paid‑up capital

2014-15

89.65

CPSEs to be disinvested







Oil & Natural Gas Corporation of India Ltd (ONGC)

Offer for sale of 5% of the Government's paid‑up capital

2014-15

68.94

National Hydroelectric Power Corporation (NHPC)

Offer for sale of 11.36% of the Government's paid-up capital

2014-15

85.96

Power Finance Corporation (PFC)

Offer for sale of 5% of the Government's paid‑up capital

2014-15

72.80

Rural Electrification Corporation (REC)

Offer for sale of 5% of the Government's paid‑up capital

2014-15

65.64

Source: WTO Secretariat, based on information provided by the Indian authorities.

              1. Proceeds from disinvestment are placed in the National Investment Fund (NIF).152 In principle, 75% of the proceeds are allocated to the funding of selected social programmes and the remainder is invested in the modernization or expansion of profitable or revivable CPSEs.153 On 17‑January 2013, the Government approved restructuring of the NIF and decided that with effect from 2013‑14 the disinvestment proceeds will be credited to the existing "Public Account" under the NIF and they would remain there until withdrawn/invested for the approved purpose. The allocations from the NIF will be decided in the annual Government budget. For 2013‑14, the Government approved allocations from the NIF towards spending on recapitalization of public sector banks and capital expenditure of Indian railways.
      1. Government procurement

        1. Overview


              1. Since 2012, the use of e-procurement has become the norm in government procurement in India. All ministries/departments of the central government must use e-procurement to publish all tender enquiries (from 1 January 2012), CPSEs from 1 February 2012, and autonomous/statutory bodies from 1 April 2012.154 On 5 October 2012, the Department of Telecommunications issued a notification concerning its policy for according preference to domestically-manufactured telecom products in procurement due to security considerations.155

              2. India is an observer to the WTO Agreement on Government Procurement. Its procurement system continues to be decentralized, comprising an array of entities at various levels of government (central, state and local) in addition to numerous CPSEs. There is no central agency responsible for regulating public procurement at a national level and no common legislation governing procurement at different levels of government and by CPSEs. Consolidated data are not available on the economic significance of government procurement, including a breakdown of the value of contracts by the tendering method. The authorities state that India is in the process of formulating a comprehensive government procurement legislation that is applicable to all parts of the central Government; the legislation is also intended to accommodate requirements of the WTO‑Agreement on Government Procurement.

              3. Whereas the central Government has reservations and price preferences as part of the procurement system, competition from foreign suppliers is ordinarily allowed in tenders advertised in India. If procurement is restricted to domestic manufacturers/suppliers, it is clearly indicated in the tender notification.

              4. Certain control and oversight functions are carried out by central authorities, such as the Comptroller and Auditor General and the Central Vigilance Commission. Procurement decisions at the central level are subject to audit by the Comptroller, and to legislative review and judicial scrutiny. There is a similar system at the state level. Public procurement carried out at state level is also subject to audit and oversight by the respective state vigilance departments, auditors, and judiciary. Some States (Karnataka, Rajasthan, and Tamil Nadu) have also passed laws to regulate public procurement.

              5. Disputes regarding procurement should be resolved in the first instance through consultation. If the parties fail to resolve the dispute within 21 days, either party may give notice to the other of its intention to commence arbitration. For contracts with domestic suppliers, the applicable arbitration procedure is under the Indian Arbitration and Conciliation Act 1996. If the contract is with a foreign supplier, the supplier may chose arbitration either through the Indian Arbitration and Conciliation Act 1996 or the United Nations Commission on International Trade Law (UNCITRAL).156 Remedies regarding public procurement contracts may also be sought under the provisions of the Indian Contract Act 1872, the Specific Relief Act 1963, and the Sale of Goods Act 1930. A public procurement process may be subject to judicial review before a High Court in India on grounds of, inter alia, arbitrariness, fairness in action, bad faith or violation of a fundamental or legal right enshrined in the Constitution of India.157

              6. Under India's competition law, collusive bidding or bid-rigging in the context of government procurement is one of the horizontal agreements that is considered to have an adverse effect on competition. The CCI has the competence to determine whether collusive bidding or bid-rigging is anti‑competitive. However, the CCI only makes an enquiry if there are complaints of an alleged contravention. After the enquiry the CCI might direct the parties to review the agreement and may impose a penalty if it deems necessary.
        2. Regulatory framework


              1. The current regulatory framework for India's public procurement includes the General Financial Rules (GFRs), 2005; the Delegation of Financial Powers Rules (DFPR); the Manual on Policies and Procedures for Purchase of Goods issued by the Ministry of Finance; Government orders regarding price or purchase preference or other facilities to sellers in the handloom sector, cottage and small-scale industries and to CPSEs; and the guidelines issued by the Central Vigilance Commission to increase transparency and objectivity in public procurement. There are also sectoral laws such as the Telecom Regulatory Authority Act 2000, the Electricity Act 2003, and the Petroleum and Natural Gas Board Act 2006, which also regulate public procurement. In addition, various Government instruments and agencies including ministries and departments (e.g. the Public Works Department and the National Highways Authority of India) have their own public procurement system.158

              2. The various ministries or departments have full powers to make their own arrangements for the procurement of goods. However, if they do not have the required expertise to procure goods, procurement may be carried out through the Directorate General of Supplies and Disposal (DGS&D), the central purchase organization, with the approval of the competent authority.159 The DGS&D keeps a registry of manufacturers/suppliers and Indian agents of foreign manufacturers, and arranges the clearance of imported goods purchased by central Government departments.

              3. The applicable procurement method depends on the value of the contract to be awarded and other factors (e.g. emergency situations) as stipulated in the GFRs 2005. The splitting of purchases into contracts of smaller value is explicitly forbidden. The procurement methods are: invitation to tender; limited-tender enquiry; single-tender enquiry; purchase of goods by purchase committee; purchase of goods without quotation; and purchase of goods directly under rate contract.

              4. The DGS&D concludes "rate contracts" for goods identified as "common use items" and needed on a recurring basis by various central Government ministries or departments. The ministries or departments must follow those rate contracts to the maximum extent possible. A rate contract is an agreement between the purchaser and supplier to supply stores (i.e. goods) at specified prices during the period covered by the contract. However, no quantities or minimum purchase requirements are mentioned in the contract. Supply orders may be placed with any of the firms holding a "rate contract" directly by the authorized officers of the central Government ministries/departments or by the DGS&D.

              5. The DGS&D prepares lists of eligible and capable suppliers of commonly purchased goods. The National Small Industries Corporation (NSIC) also registers MSEs, under the single point registration scheme; this is considered equivalent to DGS&D registration. MSEs registered under the scheme are exempt from payment of fees related to the issue of the tender and of earnest money and security deposit; they also benefit from the preferences reserved for MSEs (see below). Registration is granted for a fixed period depending on the nature of the goods, and may be renewed upon application.
        3. Preferential policies at the central Government level


              1. India retains preferential treatment in government procurement from MSEs. On 23 March 2012, the Government announced that the central Government ministries, departments and public sector undertakings will be obliged to procure a minimum of 20% of their annual procurement in value from MSEs starting as from 1 April 2015.160 The order also earmarked a sub‑target 4% procurement of goods and services, out of the 20% from MSEs owned by Scheduled Caste or Scheduled Tribe entrepreneurs.161

              2. Reservations exist for MSEs and for certain products. MSEs receive purchase and price preferences in procurement by central Government ministries/departments and CPSEs. Under the purchase‑preference system, 358 items have been reserved for exclusive procurement from MSEs (Table A3.1) and 20 items for exclusive manufacturing in the micro- and small sectors. The purchase‑preference system offers price preferences of up to 15% to MSEs over the quotations provided by large‑scale industries. MSEs are also assisted through the: (i) issue of tender sets free of cost; (ii) exemption from payment of "earnest money" (deposits) and transparent criteria. Under the present Government purchase and price policy for MSEs, the Government has been extending various facilities to the MSEs registered with the NSICI under its Single Point Registration Scheme.

              3. The central Government has reserved all items of handspun and hand‑woven textiles (khadi goods) for exclusive purchase from the Khadi and Village Industries Commission (KVIC). The central Government purchases all items of handloom textiles exclusively from the KVIC and/or the Association of Corporations and Apex Societies of Handloom, and coir products from the Coir Board.
        4. Procurement of services


              1. When outsourcing services, a limited tender enquiry is used if the estimated value of the work or service is Rs 1 million or less. Eligible bidders are on the ministry/department's list of potential contractors. This list is prepared through formal or informal enquiries with other ministries and organizations involved in similar activities and research in trade journals. At least three contractors must be identified for issuing a limited tender enquiry. If the estimated value of the work or service is more than Rs 1 million, an advertised tender enquiry must be published in at least one popular largely circulated national newspaper and on the ministry/department's website.
        5. Procurement at the state level


              1. Some states (e.g. Tamil Nadu and Karnataka) have enacted a law exclusively governing public procurement of goods. Nonetheless, in most states the GFRs govern procurement and are based on the central Government GFRs.
        6. Procurement in the railway and other specialized sectors


              1. Since India's previous Review, there have been no major changes to procurement in the railway, postal system, telegraph, and defence industries, which is subject to specialized procedures developed by the ministries responsible, within the overall framework of the GFRs 2005. In general, competition from foreign suppliers is allowed in respect of high technology or high-value items. For procurement in railways, foreign firms are free to participate in tenders advertised in India only, but payment against such contracts must be received in Indian rupees on par with indigenous suppliers. Global tendering is frequently used in procurement of rolling stock, wheels, machinery and plant equipment, including technology transfer. Indian Railways evaluates all offers based on the total destination cost. Domestic goods bids are evaluated based on freight up to destination including all taxes and levies. Offers from abroad are evaluated based on the c.i.f. value of imports and customs duties, but inland freight is not taken into account.
      2. Intellectual property rights

        1. Introduction


              1. India has an important economic interest in protecting the intellectual property rights (IPRs) of its creators and inventors, particularly in the creative and knowledge-based industries. It is an active stakeholder in the international intellectual property community, and party to key WIPO treaties.162 Since the last Review, India has in its 2012 telecommunications policy favoured "Indian" IPRs163 in line with other policies favouring local manufacture. 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. It is stated that such compulsory licences will be issued only within the provisions of the TRIPS.164 In the Global Innovation Index 2014, India slipped ten positions to rank 76th in the world.165

              2. With a view to designing an IPR policy that would stimulate innovation across sectors within the country, the Government constituted an "IPR Think Tank" with the mandate to prepare the draft national IPR policy. The Think Tank submitted its draft National IPR Policy on 19 December 2014.166

              3. While India has laws covering different aspects of IPRs that have been amended from time to time, including in order to take into account its TRIPS obligations167, only the Copyright Act, 1957 has been amended since 2011. India's WTO contact point for IPRs remains the Department of Commerce. The nodal department for industrial property such as patents, trademarks, industrial designs and geographical indications remains the Department of Industrial Policy and Promotion, which is part of the Ministry of Commerce and Industry. The nodal Ministry for copyright remains the Ministry of Human Resources Development, while that for the protection of new plant varieties remains the Ministry of Agriculture.

              4. Appeals regarding administrative decisions relating to patents, trademarks and geographical indications fall to the Intellectual Property Appellate Board (IPAB) that has been in operation since 2007 with respect to patents, and since 2003 with respect to trademarks and geographical indications. It has not been decided whether to add plant variety protection to the jurisdiction of the IPAB.

              5. The following sections give an overview of each IPR law and its implementation, focusing particularly on developments since 2011.
        2. Patents


              1. India's current patent law was amended in 1999, 2002 and 2005 since the implementation of the TRIPS Agreement. The rules currently applicable are the Patents Rules 2003, as last amended by the Patents (Amendment) Rules 2014, effective 28 February 2014. The description of filing and other procedures in the last Review are still valid.168

              2. India had over 40,000 patents in force as at end-2013. While the number of patent applications has been steadily increasing, the number of patents granted has decreased by one‑third (Table 3.22). This may indicate that the backlog of patent applications is growing. On the resident and non-resident breakdown, Indian applicants hold less than one-fifth of the patents in force as at 2012-13. Moreover, while patent applications from residents and non-residents were about the same in 1999, in 2013 non-resident applications were three times higher than resident applications (Chart 3.5). Nevertheless, four Indian entities, including two in the public sector, figure among the top 20 applicants in India (Table A3.8).

Chart 3.7 Patent applications in India, 1999-2013

Source: WIPO Statistics database.



              1. Sectors that have attracted the most patent applications in the period 1999-2013 are pharmaceuticals, organic fine chemistry and computer technology (Chart 3.6). A special effort was made between 2006-08 to speed up the granting of patents and reduce the backlog. 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). Additionally the strengthening of the functioning of the IP Offices will be continued through further modernization.

              2. There have been several important developments in the period since the last Review in the implementation of India's patent law. An important provision, namely Section 3(d), was interpreted by the Supreme Court in April 2013 in the context of Novartis A.G. vs. Union of India and Others.169

Table 3.32 Patents, 2009/13

(Fiscal year)






2009/10

2010/11

2011/12

2012/13

Patents

Filed

34,287

39,400

43,197

43,674

Examined

6,069

11,208

11,031

12,268

Granted

6,168

7,500

4,381

4,126

Residents

1,725

1,273

699

716

Non-residents

4,443

6,236

3,682

3,410

In force

37,354

39,554

39,989

43,920

Residents

6,781

7,301

7,545

8,308

Non-residents

30,553

32,293

32,444

35,612

Source: Annual Report 2012-2013. Viewed at: http://ipindia.nic.in/cgpdtm/AnnualReport_English_2012_2013.pdf and information from the Government of India.

Chart 3.8 Patent applications by top fields of technology, 1999-2013



Source: WIPO Statistics database.



              1. The Supreme Court of India in its judgement said that there was no doubt that the amendment/addition made in Section 3(d) was meant especially to deal with chemical substances, and more particularly pharmaceutical products. "The amended portion of Section 3(d) clearly sets up a second tier of qualifying standards for chemical substances/pharmaceutical products in order to leave the door open for true and genuine inventions but, at the same time, to check any attempt at repetitive patenting or extension of the patent term on spurious grounds." Further it was said that "efficacy" should be understood as "therapeutic efficacy", which must be judged "strictly and narrowly". In paragraph 190 of the judgement, the Court held that "in whichever way Section 3(d) may be viewed, whether as setting up the standards of "patentability" or as an extension of the definition of "invention", it must be held that on the basis of the materials brought before this Court, the subject product, that is, the beta crystalline form of Imatinib Mesylate, fails the test of Section 3(d), too, of the Act." The Supreme Court has also clarified that the test of Section 3(d) of the Act does not bar patent protection for all incremental inventions of chemical and pharmaceutical substances.

              2. It would appear that the recent rejection of one of the patent applications filed in India on a breakthrough innovative product to treat Hepatitis C, a disease that is widely prevalent in India, was on the grounds that, while the claims may be both novel and inventive, they do not prove significant enhancement of "therapeutic" efficacy and hence are not in line with of Section 3(d) of the Indian patent law.170

              3. Another important development in the area of patents since the last Review is the issuance in March 2012 of India's first and only compulsory licence so far. This was on a patented anti‑cancer medicine called sorafenib Tosylate.171 The Controller General of Patents, Designs and Trade Marks issued a compulsory licence under Section 84 of the Patents Act deciding that the reasonable requirements have not been satisfied with respect to the patented invention; the patented invention is not available to the public at a reasonable price; and that the patented invention has not been worked in the territory of India as required by the law. The compulsory licence was issued with 6% royalty to be paid to the patent owner. Upon appeal to the IPAB, the royalty was increased to 7% without changing either the decision to grant a compulsory licence or any other conditions of this licence.172 In July 2014, the Mumbai High Court upheld the earlier order of the IPAB. In December 2014, the Supreme Court refused to admit the appellant's special leave petition.173 India has not issued any other compulsory licence since even though two more applications for such licences have been received by the Controller General of Patents, Designs and Trademarks in the fiscal years 2011/12 and 2012/13.174 The Controller General of Patents, Designs and Trademarks received another application filed by M/s. BDR Pharma seeking issue of a Compulsory Licence under Section 84 of the Patents Act; it was turned down on the grounds that sufficient efforts had not been made by the company to seek a voluntary licence from the patentee.

              4. India has implemented the special compulsory licence regime for exports following the adoption of the Decision on the Implementation of Paragraph 6 of the Doha Declaration in August 2003. Section 92A of the Indian law states that a compulsory licence shall be available for manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector that need them to address public health problems. One condition is that the importing country should have issued a compulsory licence or, by notification or otherwise, allowed the importation of these products from India. No special rules have been put into place to implement Section 92A. It is not entirely clear how India intends to address the issue of safeguards against diversion that are part of both the August 2003 decision and the subsequent Protocol Amending the TRIPS Agreement that proposes to transpose the decision into the text of TRIPS Agreement in a new provision, Article 31bis. However, Section 92A(2) states that the compulsory licence is to be granted solely for manufacture and export of the concerned pharmaceutical product, as per the terms and conditions specified by the Controller General of Patents, Designs and Trademarks in the decision granting the compulsory licence, which must be published. This may be viewed as ensuring transparency and appropriate safeguards.

              5. The Indian patent office has issued patent examination guidelines to address a number of specific issues. However, while these guidelines provide guidance to patent examiners, they do not overrule the law, which would prevail in case of conflict between the guidelines and the Patents Act.

              6. In December 2012, final Guidelines for the Processing of Patent Applications Relating to Traditional Knowledge and Biological Materials were released based on a draft version issued for comments a month earlier. Section 3(p) of the Patents Act states that "an invention which, in effect, is traditional knowledge or which is an aggregation or duplication of known properties of traditionally known component or components" is not an invention and hence, not patentable. Further with respect to biological materials, Section 6(1) of the Biological Diversity Act 2002 provides that "no person shall apply for any intellectual property right, by whatever name called, in or outside India for any invention based on any research or information on a biological resource obtained from India without obtaining the previous approval of National Biodiversity Authority before making such application; provided that, if a person applies for a patent, permission of the National Biodiversity Authority may be obtained after the acceptance of the patent but before the sealing of the patent…"175 The Biological Diversity Act 2002 provides that "whoever contravenes or attempts to contravene or abets the contravention of the provisions of the Section 3 or Section 4 or Section 6 shall be punishable.176 Nondisclosure or false submission of the source or geographical origin of biological material used for an invention in the complete specification forms a ground for pre- and post-grant opposition under Clause (j) of Sections 25(1) and 25(2), respectively, of the Patents Act that could lead to revocation of the patent. The Guidelines state that exemption to medicinal plants from the provisions of the Biological Diversity Act, 2002 given by the notification issued by the Ministry of Environment and Forests Notification dated 26 October 2009 is available only if they are traded as commodities and the provisions are applicable if the biological resources are used as ingredients for medicine.177

              7. In March 2013, final Guidelines for the Examination of Biotechnology Applications for Patent were issued based on comments received on a draft that was released in December 2012. The Guidelines have clarified that products such as microorganisms, nucleic acid sequences, proteins, enzymes, compounds, which are directly isolated from nature, are not patentable subject-matter. However, processes of isolation of these products can be considered subject to requirements of Section 2(1)(j) of the Act, namely inventive step. This is an interpretation of Section 3(c) of the Act, which states that the mere discovery of a scientific principle or the formulation of an abstract theory or discovery of any living thing or non-living substance occurring in nature is not a patentable invention.

              8. In June 2013, the Office of the Controller General of Patents Designs and Trademarks issued draft Guidelines for the Examination of Computer-Related Inventions.178 The law in Section 3(k) states that computer programs per se cannot be patented. These guidelines indicate that computer programs loaded on a general-purpose known computer or related devices cannot be held patentable. These guidelines go on to state that for considering the patentability of computer programs in combination with hardware features, the hardware portion has to be something more than a general-purpose machine.

              9. In October 2014 Guidelines for Examination of Patent Applications in the Field of Pharmaceuticals were issued.179 These guidelines were issued after wide consultation on a draft issued in August 2014 with stakeholders both online and otherwise. Several comments made were accepted. For example, the disclosure of the international non-proprietary names of medicines in patent applications is not mandatory as was initially proposed. Guidance on the interpretation of Section 3(d) merely quotes large excerpts from the Supreme Court judgement referred to above and the IPAB decision of 2013 and provides no further guidance.180

              10. In the context of intellectual property and climate change, a subject under discussion in the TRIPS Council since March 2013, India's National Manufacturing Policy of 2012 states in paragraphs 4.4.1 to 4.4.3 that: on occasion, a company may be unable to access the latest patented green technology, which can substantially reduce its carbon footprint, because of its inability to obtain a voluntary licence from the patent holder. This could arise for two reasons. First, the cost of obtaining such voluntary licence could be a barrier for the company. Second, the patent holder could be unwilling to part with the licence, or it is not available at reasonable rates or it is not being worked in India (Section 4.4.1); to address the first issue, the Technology Acquisition and Development Fund (TADF) will also function as an autonomous patent pool and licensing agency. It will purchase IP rights to inventions from patent holders. Any company that wants to use the IP to produce or develop products can seek a licence from the pool against the payment of royalties. This company may then produce the product for use in specified geographical areas subject to meeting agreed quality standards. The TADF would reserve the right to license more than one company for a particular patent (Section 4.4.2); and to address the second issue, 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 being worked in India to meet the domestic demand in a satisfactory manner. Such compulsory licences will be issued only within the provisions of TRIPS. Reasonable royalty will be paid to the patent holder (Section 4.4.3).
        1. Trademarks


              1. Trademarks are protected under the Trade Marks Act 1999, which was last amended in 2010, and entered into force on 8 July 2013. This amendment was to ensure compliance with the Madrid Protocol of WIPO, which India acceded to in April 2013. The Trade Marks Rules 2002 were amended in 2010 and 2013, the latter amendment being to implement the Madrid Protocol. The Madrid System provides a mechanism for domestic trademark holders to facilitate the protection of their trademarks in countries which have also acceded to the Protocol. It also allows foreign trademark-holders to protect their trademarks in India. India has subsequently issued guidelines for applicants.181 The rules were further amended in 2014 to increase application and expedited examination fees. These rules came into force in August 2014.

              2. The procedures for the filing and examination of trademarks described in the Secretariat report in the last Review remain valid.182 India's amended law allows trademarks for shape of goods and packaging as well as for holograms, combinations of colours or colours if found to be distinctive. Sound marks are permitted if these are capable of being represented graphically and are found to be distinctive through use.183

              3. The trends of trademarks' filing, examination and registration in India, as well as trademarks that remain in force show the reduction in registrations in 2011-12 and 2012-13 (Table 3.23).

Table 3.33 Trademarks 2009/13

(Fiscal year)






2009/10

2010/11

2011/12

2012/13

Trademarks

Filed

141,943

179,317

183,588

194,216

Examined

25,875

205,065

116,263

202,385

Registered

67,490

115,472

51,735

44,361

Residents

62,067

102,967

44,026

40,245

Non-residents

5,423

12,505

7,709

4,116

In force

67,490

115,472

51,735

44,361

Residents

62,067

102,967

44,026

40,245

Non-residents

5,423

12,505

7,709

4,116

Source: Annual Report 2012-2013. Viewed at: http://ipindia.nic.in/cgpdtm/AnnualReport_English_2012_2013.pdf; and information from the government of India.

              1. Unlike patents, resident trademark applications and grants represent nearly ten times those of non-residents. Indeed, it is only in 2010-11 and 2011-12 that there has been a spurt in non-resident registrations as is apparent in the graph.

              2. With regard to the question of parallel imports, it is clear that Section 30 of the Trademarks Act permits such imports of trademarked goods. Indian courts have upheld this provision several times but have clarified that the importer needs to prove that the initial purchase was legitimate and not of counterfeit goods.184

              3. India protects well-known trademarks in its law and courts have upheld internationally‑well-known marks.185 Since 2011, India's Trademarks Registry has been publishing a list of well-known marks186 and prohibited trademarks, including a specific list of International Non-Proprietary Names as established by the WHO. The draft Manual for Trademark Practice and Procedure187 states that: sub-sections (6) to (10) of section 11 deal with matters concerning protection of well-known trademarks. Sub-section (6) lays down factors which the Registrar should take into account in determining whether the trademark is well-known. The onus is on the proprietor to establish by evidence that the mark is well-known. On the other hand, sub section (9) mandates that the Registrar shall not require as a condition for determining that a trademark is well-known any of the following factors: (i) that the trademark has been used in India; (ii) that the trademark has been registered; (iii) that the application for registration of the trademark has been filed in India; (iv) that the trademark is well-known, or has been registered, or in respect of which an application for registration has been filed in any jurisdiction other than India; or (v) that the trademark is well-known to the public at large in India.

              4. Sub-section (10) obliges the Registrar to protect a well-known mark against identical or similar trademark and to take into account "the bad faith of either the applicant or the opponent in respect of the rights relating to the trademark".188 Section 2(2) clarifies that any reference: (a) to "trademark" shall include reference to "collective mark" or "certification trade mark"; (b) to the use of a mark shall be construed as a reference to the use of printed or other visual representation of the mark; (c) to the use of a mark in relation to goods shall be construed as a reference to the use of the mark upon, or in any physical or in any other relation whatsoever, to such goods; (d) to the use of a mark in relation to services shall be construed as a reference to the use of the mark as or as part of any statement about the availability, provision or performance of such services; (e) to the Registrar shall be construed as including a reference to any officer when discharging the functions of the Registrar in pursuance of sub-section (2) of Section 3; (f) to the Trademarks Registry shall be construed as including a reference to any office of the Trademarks Registry.

              5. On occasion, courts are said to have interpreted the language narrowly to exclude use of well-known trademarks as trade names and industry has called for an amendment to make it clear that well-known trademarks are not allowed to be used as trade names, as this may dilute the trademark.189 However, while recognizing well-known marks, the Courts may have to take into account other considerations to reach a decision. The requirement that each individual case should be judged on its own facts is also stipulated in the WIPO joint recommendation on the well-known marks in Article 2 (1) (c) of the resolution. There have been many such cases where the Trademarks Registry or the courts have decided that the protection would apply to any other product. Cases in point are the Judgments on Sony, Bajaj Electrical Limited, Enfield Bullet, and Whirlpool Corporation in respect of protection of product and trade names.190
        1. Industrial designs


              1. Industrial design law in India has remained unchanged since the last Review.191 Draft amendment rules were notified in October 2013 and have not yet been approved.

              2. The rate of examination and registration of industrial designs in India shows hardly any backlog (Table 3.24). Since January 2011, 240 cancellation petitions are said to have been filed under Section 19 of the Designs Act 2000 and 51 designs have been cancelled by the Controller General of Patents, Designs and Trademarks. Fourteen appeals have been filed before the High Court, of which two have since been decided. Around 45,000 designs are said to be in force in India as of March 2014.

Table 3.34 Designs, 2009/14

(Fiscal year)






2009/10

2010/11

2011/12

2012/13

2013/14

Designs

Filed

6,092

7,589

8,373

8,337

8,533

Examined

6,266

6,277

6,511

6,776

7,281

Registered

6,025

9,206

6,590

7,252

7,178

Residents

3,552

6,369

4,162

4,662

4,330

Non-residents

2,473

2,837

2,428

2,590

2,848

In force

..

..

..

42,786

44,903

Residents

..

..

..

..

..

Non-residents

..

..

..

..

..

.. Not available.

Source: Annual Report 2012-2013. Viewed at: http://ipindia.nic.in/cgpdtm/AnnualReport_English_2012_2013.pdf and information from the Government of India.



              1. Industrial design applications and registrations are dominated by residents, although to a lesser extent than in the case of trademarks. Foreign applications have been increasing at a particularly sharp rate since the last Review but the 20 top holders of industrial designs among Indian entities engaged in different commercial sectors such as apparel, electrical products, engineering, jewellery, shoes and consumer goods (Charts 3.7 and 3.8). The top 20 foreign holders of industrial designs in India are from sectors such as automobiles, electronics, consumer products and engineering.

Chart 3.9 Industrial design applications, 1999-2013

Source: WIPO Statistics database.



Chart 3.10 Industrial design registrations, 1999-2013

Source: WIPO Statistics database.



              1. Since the last Review, there have been a number of clarifications, including in cases litigated in India, that throw more light on the interface between design, patent and copyright law. Under India's Designs Act Section 2(d) design protection for designs that serve a particular function is excluded. Only non-functional designs are protected as patent law should be used to protect new, functional industrial designs. This is accepted and is also made clear in the TRIPS Agreement.192

              2. Section 2(c) of the Designs Act also excludes designs that are artistic works as defined under the Copyright Act. Industrial products can be produced using artistic works protected under the Copyright Act; under Section 15(2), if these industrial processes are applied to a copyrighted work more than fifty times, copyright protection in the design, as applied in the industrial process but not in the original artistic work, ceases.193 In this respect, the lines between copyright in three-dimensional forms of artistic works and industrial design protection are not clear. In cases where designs have not been protected and yet copyright protected works have been industrially reproduced more than fifty times, the IPR owner may lose copyright protection.194
        1. Copyright


              1. India is the world's largest producer of films and the total contribution of the Indian film and television industry to India's GDP is estimated at 0.5% or Rs 500 billion (or approximately US$8 billion).195 This industry, in which copyright protection plays an important role, is projected to grow at a compound growth rate of 17% per annum up to 2017. The English and foreign films segment represents only around 6% of total revenues from films in India, but this is set to grow due to increasing use of dubbing of foreign films into Indian languages. The Government is also trying to attract foreign film production to India. India is already being increasingly used for visual effects and animation by the foreign film industry, especially Hollywood.196

              2. Similarly, the Indian music industry is reported to have had revenues of around US$150 million in 2013, of which over 50% was obtained through digital sales. Over 80% of music relates to film music in India; in some cases, over 10% of a producer's revenues could come from music. Digital sales and licensing revenues are expected to rise in the near future.

              3. With regard to the publishing industry, it is believed to be growing at a compound annual growth rate of 30%. India is said to be the world's seventh largest book publishing country with over 16,000 publishers, the huge majority being small players and family-owned units.197

              4. Procedures for obtaining copyright protection in India described in the last Review are still valid.198 While India's Copyright Act 1957 required only minor changes in 1999 to bring it into compliance with the TRIPS Agreement, it was substantially amended in 2012, and entered into force on 21 June 2012199, to inter alia implement the 1996 WIPO Copyright Treaty (WCT) and the WIPO Performers and Phonograms Treaty (WPPT). The Copyright Rules 2013 replaced the old Copyright Rules, 1958.200 A handbook on copyright law in India is available online.201

              5. A major change has been to ensure that copyright holders are protected against circumvention of effective technological measures and rights management devices, while maintaining an appropriate balance between the interests of the right-holders on the one hand and that of technology innovators, researchers and educational institutions, on the other. Moral rights have been extended to performers, which is in conformity with the WPPT. The right of reproduction of artistic works, cinematographic works and sound-recordings now includes storage of the protected work in any electronic or other media. In refining the rental right, the amended law defines commercial rental to exclude use for non-profit purposes besides protection of technological measures and protection of Right Management Information (RMI) in the digital network.

              6. In the Copyright Act, exclusive rights in reproduction, circulation, communication to the public and rental rights have been provided. In particular, rights of performers have been clarified and consolidated, including in the context of cinematographic works and sound-recordings, without prejudice to the rights of authors, thus implementing Articles 6-10 of the WPPT. Rights of performers are now phrased as positive rights and have been extended, inter alia, to communication over the internet and to moral rights. The term of protection of photographs has been extended to 60 years after the death of the author, as in the case of other artistic and literary works.

              7. A compulsory licence can be issued by the Copyright Board on any work withheld from the public. Special provisions have been inserted for works relevant to the disabled. In addition, access to copyright content has been improved to broadcasting organizations through non-voluntary licences where the terms are to be fixed by the Copyright Board.

              8. Registration of copyright societies has been made mandatory and several provisions have been introduced to protect authors and improve transparency in the functioning of such societies.

              9. Fair-use clauses have been extended to cinematographic works and sound-recordings. Importation of copies of any literary and artistic works such as labels, company logos or promotional or explanatory material that is purely incidental to other goods or products being imported lawfully has been clarified not to be an infringement. Parallel imports of copyrighted works are not permitted. Fair-use has been extended to the digital environment also where temporary storage (caching) is not an infringing act. Notice and take-down procedures have been introduced to make internet service providers otherwise liable (Section 52(c)). The WIPO Marrakesh Treaty for Visually Impaired Persons has been implemented through fair-use provision to access, for example, copyrighted works in a special format.
        2. Geographical indications


              1. India has a strong interest in the protection of its geographical indications (GIs). India's Geographical Indications of Goods (Registration and Protection) Act, 1999 came into force on 15 September 2003. Registration of GIs in India began thereafter. Laws, regulations and rules remain unchanged since the last Review and thus procedures for the protection of GIs described therein remain unchanged.202

              2. Table 3.26 shows the trend in the registration of geographical indications.203 Darjeeling for tea from the Darjeeling district of India was the first GI registered in India. It is estimated that 10,000 million kg of "Darjeeling" tea are produced in India, but 30,000 million are sold under the same name around the world.204 Among other agricultural products with export value205, it must be noted that basmati for rice is not a registered GI in India, nor are alphonso mangoes from Maharashtra state, although Dusseheri mangoes from Uttar Pradesh state are registered as a GI.

              3. The nine foreign GIs registered so far are: Pisco Sour from Peru, Champagne and Cognac from France, Napa Valley from the United States, Scotch Whiskey from the United Kingdom, Prosciutto di Parma from Italy, Porto and Duoro from Portugal, and Tequila from Mexico.206 It would appear that certain European cheese GIs are being produced and sold by Indian manufacturers in India, although these are not being claimed to have originated in Europe, thus not resulting in confusion as to their origin.

Table 3.35 Geographical indications, 2009/14

(Fiscal year)






2009/10

2010/11

2011/12

2012/13

2013/14

Geographical indications

Filed

40

27

148

24

75

Examined

46

32

37

30

42

Registered

14

29

23

21

22

In force

120

149

172

193

215

Residents

119

114

164

184

206

Non-residents

1

5

8

9

9

Source: Annual Report 2012-201. Viewed at: http://ipindia.nic.in/cgpdtm/AnnualReport_English_2012_2013.pdf; and information from the Government of India.
        1. Protection of new plant varieties


              1. India enacted the Protection of Plant Varieties and Farmers' Rights (PPV&FR) Act in 2001 (53 of 2001) by opting for a sui-generis system. The PPV&FR Act provides for the establishment of an effective system for protection of plant varieties, the rights of farmers and plant breeders and to encourage the development of new varieties of plants of economic importance. It is said to be a unique Act, which fulfills the spirit of the International Treaty on Plant Genetic Resources for Food & Agriculture on one hand and conforms to the International Union for the Protection of New Varieties of Plants (UPOV), 1978 Convention on the other.207 The PPV&FR Act, 2001 follows the internationally recognized criteria of distinctiveness, uniformity and stability (DUS) and novelty for a new variety. There have been ten amendments to the PPV&FR Rules, 2003, the last four during the term of this Review having taken place between December 2012 and February 2013 to deal with matters such as the production and sale of registered varieties, the notification of costs to be imposed by the Authority, the submission of the annual statement of accounts of the Authority and the form for the registration of farmers' varieties.

              2. Procedures for the protection of new plant varieties remain unchanged since the last Review.208 The certificate of registration is issued for a term of nine years for trees and vines and six years for other crops and is renewable for a maximum of 18 years for trees and vines, or a total of 15 years for extant varieties (from the date of notification under the Seeds Act 1966) and other crops (from the date of registration of the variety). Registration of a variety is not allowed when the prevention of the commercial exploitation of such variety is necessary to protect public order or morality, following the wording of Article 27.2 of the TRIPS Agreement.

              3. A certificate of registration for a variety confers an exclusive right on the breeder or his successor, his agent or licensee, to produce, sell, market, distribute, import or export the variety. However, farmers are entitled to save, use, sow, re-sow, exchange, share or sell their farm produce, including seed (except "branded seed")209, of a variety protected by the Act.210 Registration cannot prevent the use of any variety to conduct experiments or research, or for the purpose of creating other varieties. The authorization of the breeder of a registered variety is required if the repeated use of such variety as a parental line is necessary for commercial production of such other newly-developed variety. Section 47(1) provides that compulsory licences can be granted after three years from the date of the grant of a registration certificate. To date, no application for such licences are said to have been filed with the Authority.

              4. The Act provides that a farmer means any person who (i) cultivates crops by cultivating the land himself, or (ii) cultivates crops by directly supervising the cultivation of land through any other person, or (iii) conserves and preserves, severally or jointly, with any person any wild species or traditional varieties, or (iv) adds value to such wild species or traditional varieties through selection and identification of their useful properties. Farmers' variety means a (i) variety which has been traditionally cultivated and evolved by the farmers in their fields, (ii) or is a wild relative or land race of a variety about which the farmers possess common knowledge.

              5. India has so far notified 92 crop species under the PPV&FR Act for plant-variety registration. During 2014-15, the PPV&FR authority notified 35 crop species.

              6. Out of the 2,032 application received in 2014-15, 834 certificates of registration were issued during the same year (extant varieties (265), new varieties (108), and farmer's varieties (461)).211 The highest number of certificates was issued for rice (536), followed by sorghum (47), Indian mustard (40), sunflower (39), cotton (35), wheat (26), groundnut (21), and other crops (100).

              7. The Government consults with the PPV&FR authority on various technical matters, including international issues relating to ITPGRFA, CBD, UPOV, WIPO and other international instruments/conventions.
        2. Trade secrets and test data protection


              1. There is no specific legislation regulating the protection of trade secrets and hence no enforcement measures/penalties for violations of trade secrets, other than under contract law and common law of passing off, breach of confidence etc. It is not clear precisely how India protects against disclosure of trade secrets by third parties not party to any formal or informal contracts or confidence. However, Indian Courts have upheld trade secret protection on the basis of principles of equity and at times upon a common law action of breach of confidence as well as breach of contractual obligation. The remedies available to the owner of trade secrets are injunctions preventing the licensee from disclosing the trade secret, orders to return all confidential and proprietary information and compensation for any losses suffered due to disclosure of trade secrets.

              2. Judicial proceedings deal with these issues on a case-by-case basis. There have been cases where the courts in India have ordered injunctions against disclosure and use of trade secrets by third parties and ordered the return of such confidential and proprietary information as well as compensation or damages for any losses suffered due to the disclosure of trade secrets. In a recent case the court ordered a subsequent employer who offered to double an employee's remuneration and induced him to reveal confidential business secrets not to use such information until the case was disposed of within one year with the cooperation of the parties, or with automatic extension of the injunction in case of non-cooperation by the defendants in the case.212 This order is in contrast to a court order in another case where injunction was refused as customers' list details were not considered to be trade secrets.213

              3. In addition to civil remedies such as injunctions or damages, India allows for criminal remedies under the Indian Penal Code 1860, such as for criminal misappropriation, breach of trust and theft of property. However, for many reasons, including prosecution by the State and the fact that the remedies available may not be what businesses may seek, the criminal route is rarely used.214

              4. There is no specific legislation protecting test data submitted for obtaining regulatory approval of pharmaceuticals. The Drugs and Cosmetics Act of 1940 regulates the manufacture and marketing approvals for drugs and traditional medicines, while the Insecticides Act of 1968 addresses the manufacture and marketing approvals for agricultural chemicals (such as insecticides, fungicides and weedicides). However, there is no statute in place in India at this time for the protection of pharmaceutical, agrochemical and traditional medicine-related data against disclosure and reliance by third parties. Such test data is said to be protected under the Official Secrets Act. However, it is not clear how India implements the second obligation under Article 39.3 of the TRIPS Agreement, which is in addition to the obligation to provide protection against disclosure, namely, protection of such data against unfair commercial use.

              5. In 2004, an Inter-Ministerial Committee was set up to make recommendations on test data protection. In its report submitted on 31 May 2007215, the Committee recommended, inter alia, that the term of data protection for agricultural chemical products should be three years from the date of marketing approval in India; that the term of data protection for traditional medicines should be five years from the date of marketing approval and that there should be an indefinite transition period for pharmaceuticals. After the transition period, the term of data protection would be five years from the date of the first marketing approval anywhere in the world. These recommendations are reportedly being considered by the Ministry of Commerce and Industry, Ministry of Agriculture and Ministry of Health.216
        3. Enforcement


              1. A 2012 study by Federation of Indian Chambers of Commerce and Industry (FICCI) and others show that the losses to industry from counterfeiting and piracy in India could be as high as Rs 730 billion, or more than US$10 billion per year. This study covered seven sectors most impacted by counterfeiting and piracy, namely auto components, alcohol, computer hardware, personal goods, packaged foods, mobile phones and tobacco. Nearly 30% of auto components and 26% of computer hardware sold in India are allegedly counterfeit.217

              2. Enforcement of intellectual property rights in India (except at the borders) is under the purview of state Governments. A system of state nodal officers and specialized IP cells within the state police to tackle piracy is in place and has been important in the IPR enforcement effort.

              3. Enforcement of IPR at India's borders is carried out by the Customs Department with respect to imports. Under the Customs Act, Customs may seize and hold goods for a reasonable period (e.g. six months), including for suspected violations of intellectual property rights, following which, the goods must be released or a court injunction obtained to start infringement proceedings. In order to further effectively implement border measures, in 2007 the Customs authorities issued a notification that prohibits imports of goods infringing intellectual property rights, namely the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007.218

              4. These rules go beyond the minimum requirements of the TRIPS Agreement as they cover border measures not solely for copyright and trademarks, but also for patents, designs and geographical indications.219 They lay down detailed procedures for right-holders or their authorized representatives and for Customs to seek suspension of release of suspect imported goods. The rules allow right-holders to record their registered intellectual property with Customs. After the grant of the registration by the Commissioner on due examination, imports of allegedly IPR‑infringing goods into India may be prohibited. The rules also permit suo moto action by Customs when infringing goods are found through random checks, and the disposal of the confiscated goods; however, the rules do not call for any action against goods of a non-commercial nature contained in personal baggage, sent in small consignments intended for the personal use of the importer, or goods in transit.

              5. Approved Registration of various IP rights with the Customs authority are as follows (Table 3.26).

Table 3.36 Approved registration of various IP rights, 2010 and 2014

S.No.

IP right

No. of approved registrations as at 31.12.2010

No. of approved registrations as at 28.12.2014

1.

Trademarks

379

881

2.

Copyright

2

8

3.

Patent

10

11

4.

Design

5

5

5.

Geographical Indications

0

0

Source: WTO Secretariat, based on information provided by the Indian authorities.

              1. During 2012, 2013 and 2014 (up to September, 2014) all cases of IPR infringements registered by Customs relate to trademark violations. Details are as follows (Table 3.27).

Table 3.37 IPR infringements, 2012-14

Year

Total cases booked for infringement of IPR

No. of cases

Value of goods (in Rs. Million)

2012

47

100.37

2013

19

20.42

2014 (up to September)

11

14.29

Source: WTO Secretariat, based on information provided by the Indian authorities.

              1. In addition to the Government's efforts to enforce IPR, industries in India have become more proactive. For example, the Ministry of Human Resource and Development recently issued an official notification designating the Federation of Indian Chambers of Commerce and Industry (FICCI) to Chair the Subcommittee under the Copyright Enforcement Advisory Council (CEAC) responsible for coordinating relevant stakeholders to address the menace of piracy. Similarly, as reported in the last Review, the Ministry of Information and Broadcasting had set up a Committee on Piracy, and IPR-holders have created associations and IPR committees to generate awareness on issues relating to counterfeit, fake, and spurious products. The music and film industry, through the Film Federation of India, Motion Picture Association, and Indian Music Industry Association, cooperates and collaborates with the police in the design and implementation of anti-piracy programmes. To support the efforts of the industry, the state Governments of Andhra Pradesh, Kerala, Maharashtra, and Tamil Nadu, where the film and music industry is prominent, have introduced legislation which stipulates that video piracy is an offence. The aim is that with enhanced coordination of the industry, enforcement will continue to improve.





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