The department of biotechnology has proposed a host of fiscal and trade policy initiatives for the promotion of R&D in biotech sector. It has called for the extension of the 150 per cent weighted average tax deduction on R&D expenditure under section 35 (2AB) until 2010 and to permit international patenting costs under this provision. This would make domestic biotech firms eligible to claim the expenditure incurred with regard to filing patents outside India for weighted deductions u/s 35 (2 ab).

Exemption of import duties on key R&D, contract manufacturing / clinical trial equipment and duty credit for R&D consumer goods to enable small and medium entrepreneurs to reduce the high capital cost of conducting research has also been proposed.

Taking serious note of the current reluctance of lending institutions to fund start up biotech companies, DBT has suggested introduction of appropriate policy guidelines from the Reserve Bank of India. The department feels that the move would enable lending by banks to biotech companies as priority sector lending.

The National Biotech Strategy draft prepared by DBT also calls for removal of customs duty on raw materials imported into India, where the finished product is imported duty free. "Life Saving Drugs imported and sold in India are exempted from paying customs duty; whereas raw materials for diagnostics and other pharmaceutical biotech products manufactured in India are levied customs duty. To promote the indigenous manufacturing industry and make it competitive globally, raw materials imported by Indian manufacturers should be eligible for Duty Drawback," DBT observed.

Rationalization of import and export of biological material for promoting clinical research and business process outsourcing has also been suggested.
The simplification and streamlining of procedures for import, clearance and storage of biologicals, land acquisition, obtaining environmental and pollution control approvals through consultations with various Central and State Government departments is another major proposal.

In an attempt to facilitate contract research activities, DBT wants efforts to be made to remove hurdles for contract research especially for input output norms and tax on revenue generated through contract research / R&D.

Promotion of easy access to information regarding legislation and rules and regulations for transboundary movements of biologicals are being thought of. The department is also proposing the enhancement of the current standards and safety of products and thereby promote acceptance of Indian regulatory data internationally.

As pharmabiz already reported, allowing 100% FDI through automatic route is also considered as an option to promote biotech sector. The DBT feels, "An effective regulatory mechanism has been put in place though recent interventions and the Foreign Investment Promotion Board (FIPB) approval for equity investment may no longer be necessary."

Being by far the most research intensive among major Industries, the biotech sector would be immensely benefited through government support, fiscal incentives and tax benefits. It is known that on an average the biotechnology sector invests 20-30 per cent of its operating costs in R&D or technology outsourcing. These measures proposed by DBT are meant to capitalize on the inherent cost effectiveness of the Indian biotech enterprise.