Engaging with US, EU to resolve issues in pharma: Comm Min

Below is the verbatim transcript of Nirmala Sitharaman’s interview with CNBC-TV18''s Rituparna Bhuyan.Q: Let me start with the pharma sector because you had a meeting regarding the pharma sector and how to protect our interests in the international markets as far as the pharma sector is concerned and we understand that several issues were discussed including that of a think tank to protect our interests as far as the pharma sector is concerned. Can you share some details on the strategy as far as protecting the Indian interests in the global pharma market is concerned?A: The pharma sector has already making a great impact in the international market. It is not as if we are forming a separate think tank for it. The think tank, already, is working on IPR and has submitted its report about the pharma sector. There is a need for innovations, how to help innovations as well. So, review meeting has not given any indication that a separate think tank has been formed, but the think tank on IPR is committed on pharma.Q: As far as the pharma sector is concerned it is not having good experience in significant markets like United States or be it European Union and many experts within India believe that there is a negative campaign being run against Indian pharma sector. So going forward in such a scenario how does India take care of its interests in such huge markets for the pharma sector?A: First thing, we have made a big impact in the US market and also in the European Union. Talking about European Union, it is important for us to know that in the last one year because of some regulatory constraints nearly 700 of our pharma producers were affected adversely based not on pharmacological evidence of how it is going to affect the patients. In fact, many of those 700 are still being used in the European Union but a ban of sorts has been now brought on a particular company, particular products affecting nearly 700.We fear there could be this adverse campaign about clinical trials and the quality of clinical trials and so on. On ban we have engaged with the European Union and their regulatory bodies at various levels through our officials and had also raised this issue when I met with the trade representative of the European Union.Q: Recently you have postponed talks with the European Union (EU) regarding this Food and Drug Administration (FDA) citing the instance of this particular case where EU banned around 700 Indian drugs. Now is going to World Trade Organisation (WTO) dispute settlement board an option if talks do not fructify, if there is no way forward in bilateral talks?A: At the moment, we had taken this considered call of deferring these talks which I was keen to start off because since 2003, talks have been going on for this Broadbased Trade and Investment Agreement (BTIA) with EU. Nearly 15 rounds had completed till before this new government came in last year and EU has been also questioning us as to saying are you keen on doing it? I was keen, I have been keen, I am keen and in fact when I met the trade representative of the EU Ms Cecilia Malmström I indicated that it is for the two of us to have our chief negotiators to start the talks and engage again. That happened and even during that meeting I had raised the question about our drugs and the various levels of engagement and as to why is there the difficulty to sort that problem out. Post that without even much of an answer coming out and if I may add our Prime Minister during his visit to France also had raised this issue of why is there a problem about a particular company or nearly 700 drugs being questioned and so on. So, we have not had any concrete answers coming.Q: Talking about Free Trade Agreements (FTA) we have had several of them including one with Association of Southeast Asian Nations (ASEAN), Japan, South Korea the steel and aluminium industry is facing the heat. They claim that cheap imports of metals is impacting that industry. Now we all know the kind of state the domestic steel industry is in. So, going forward what are the options with us as far as the steel industry is concerned because they claim that it is cheap imports from FTA related countries which is basically harming the domestic sector especially the steel sector. What are the tools that can be used or are there any thoughts within the ministry itself?A: I would want to give you a very calibrated response for this. Indian steel industry exists and has been here for a long time and steel is a very important component in many of our units, which link to the value chain with China and therefore cheap steel as a raw product for those small units which produce other products based on the input steel, also are in the picture. Before I get into the details there, FTA related fears is something on which I would just want to give you just two statistics. The imports coming out of FTA, let us take the example of Malaysia for instance, has not even reached six percent level. If imports are really coming in from Malaysia or from any of these countries with whom we have an FTA and that was really flooding our markets and as a result of which we have to be cautious about protecting our units I understand but six percent after FTA is fine.Q: Which means there is an over capacity within the domestic sector itself perhaps. A: All that I want to put on record is there is not such a flush of imports, I am taking the example of Malaysia, now take the example of Korea; again another country again with which we have an FTA, 29 percent is what is imported. Sizeable, I agree but also getting cheaper raw material through the FTAs has been one of the important features which cannot be negated. Who is getting the cheaper raw material? Many of our small and medium units which procure these cheap raw materials, which gives a lot of employment, which produce and sell within the country or in some few cases may also export. Now, for them if that steel is cheaper and it if it is affordable should we also take care of their interest or just raise the duties continuously in such a way that we are protecting one section of the steel which is important I agree, I am not saying we should not take care of them, one section of the steel industry whose product, the steel, is more expensive compared to the cheaper imports which are coming in if comparable qualities are what I am talking about. Maybe there are cheaper imports which are inferior in quality, I am not trying to compare them but if cheaper comparable raw materials are available, am I here to protect one section of the steel industry which is important and I need to do that but would it be at a disadvantage to a larger section which is also wanting the cheap raw material because they can produce, they can employ, they can sell if at a competitive rate, because of the cheap import. So, this is a situation which is complex, which is bringing in cheaper raw material to the units which are an important component in the value chain related to these products and also the cheaper imports are affecting our own steel industry for whom their market is being taken away. So, there is a need for us to balance every such argument where there is a call for raise the duty, stop the import, I also have enough number of voices which tell me don’t raise the duty because we need those cheap imports, we will be better off. So, we are definitely in a situation where the market realities are definitely playing up and we have to ensure that Indian industries, be they large, be they small, will have to be taken care of.Q: Talking about exports there is a very big puzzle which not many experts have been able to decipher and that is regarding the nine month continuous fall in exports at a time when the dollar is favourable for the exporters. You also released the foreign trade policy and yet we are seeing this fall in exports. So, should we get ready for a scenario where exports will keep on falling for some time? What is the sense that you get as far as overall export scenario is concerned? A: I am not trying to shift the blame, let us have the real picture before us. Exports are falling for various reasons, many of which are outside our control. Out of let us say 25 countries, where we majorly export, 18 are going through economic crisis. Their gross domestic product (GDP) rates are falling, their growth is affected very badly as a result of which in those 18 out of 25 countries, the demand is also not getting newly refurbished.Q: Recently we saw this yuan being devalued. Experts say that could impact our exports. What is the sense within the Commerce Ministry on that? Is there any strategy?A: We in fact, on the yuan devaluation, the Chinese stocks falling, before the devaluation, our issues on which we have been very acutely engaged. I am very grateful that the Chief Economic Advisor, Arvind Subramanian responded immediately to the Commerce Ministry, sat with us, worked out a lot of things with us, discussed and shared his thoughts. The Commerce Ministry has spent a lot of time subsequently also to understand the impact. Certainly, the devaluation of yuan will make it possible for more Chinese goods to come into India. As I said, it will be cheaper and they will come in, many of our people would want to import and so on. But, we are also closely monitoring the situation where we would like to see what are the opportunities also involving. So, it is the state at which China is just not looking at its own devaluation and also exporting more. It is also recognising that many of the manufacturers who were otherwise placed in China are now coming over to India and setting up business; Foxconn, Xiaomi, lots of them are already moving and that is being taken cognizance of. So, if I am worried about devaluation I am also happy about many of the producers who would no longer want to be in China, who are coming over to India and are setting up business here. So, it is going to be a very challenging situation which has both opportunities and of course definitely challenges which we have to address. Q: Let us quickly Department of Industrial Policy & Promotion (DIPP) related issues. You have had intense discussions with states on issues related to e-commerce. Is there a case for opening up business to customer (B2C) e-commerce because we understand that several stakeholders wanted that and even some states voted for having more foreign direct investment (FDI) n the B2C segment of e-commerce.A: On this, we have had quite a few rounds of discussion. I have met with the State Ministers, which was on July 15, and prior to that on July 10, the DIPP officers sat with the banking sector, sat with many other stakeholders, spoke to all of them, policy makers and so on. Now, e-commerce, business to business (B2B) is alright. But, it is on the B2C many of them have their own concerns and also anxieties which is what came across. We wanted the states to also come back to us post those discussions within a matter of two weeks, so that we can sit and work on all that has been emerging, during the discussions and also through the written statements from the states. Many of them have not come back and the ministry is definitely reminding them to come back to us because eventually we should be able to give some kind of a guideline. So, it is a very potent, activity segment on which many states are already seeing a lot of investments and if such investments are happening and if the Indian investment there is no issue but if there are FDI coming in what is it that we have to do because as you know B2B can be discussed but B2C is where money is waiting to come but states are not clear.We don't have clear cut guidelines established and if you want to get that money or if you don't want to get the money you should know why and you should have a clear framework under which you operate. There cannot be unlevel playing field where you are stopping them from entering into multi brand retail but e-commerce gets the money then your brick and mortar is going to be even more disadvantaged. So, that is where we are very clear that unless the states come back to us even to get a guidelines fitted so that there is a level playing field for B2B, B2C or multi brand retail can be made.Q: So, if required and if the feedback is positive there is no problem in going ahead with B2C e-commerce as far as FDI is concerned but states will have to take a call and they have to give you feedback.A: States are not just going to have to take a call on the FDI. They also have to talk to us about what are the tax related issues because you know already, in Karnataka, there are issues which are now in public domain. Many of the e-commerce companies are saying we cannot be taxed on ‘A’, taxed on ‘B’ and so on. So, taxation related issues, definition related issues, issues of where e-commerce commences and where it ends and where retail begins and where it ends, where are the overlaps because you know many of the brick and mortar companies have themselves adopted to bringing in trading through e-portals. They are selling in the neighbourhood. Even if it is in the neighbourhood, they are selling through e-portals. Many of the e-commerce firms which started at just those running portals for bringing together the seller and the buyer are today also warehousing, keeping inventory. So, the thin line is getting blurred even more. We are waiting from the states on a comprehensive reply, post which, the ministry will sit and work together so that we have some guidelines without hurting the level playing field argument.Q: Do you see the Land Ordinance being extended or do you see we reverting to the 2013 act wherein finally the states will take a final call on how the land regime will operate in the final state? As a commerce and industry minister and as somebody who is responsible for industrialisation how do you see this land discourse panning out? A: First of all, there are difficulties which our ministry has pointed out. In fact if I can just briefly go back, on the 2013 act too before it became an act, this ministry and the then minister had written a letter which you know was read out in the parliament. The ministry’s position has been very clear about the 2013 act by the then minister and now. If even under this and we all want to honour every commitment in terms of protecting the interest of the farmers but if a social impact assessment (SIA) where no displacement takes place will need nearly 48 months. If there are displacements happening it would take nearly 56-60 months. Wait for five years to have social impact assessment; I am not even talking about foreign investors, Indian investors, do you think they can wait for 60 months before they say right I am now starting the investment? Is this realistic? Q: What is the solution then?A: That is what I am saying. Therefore, the effort of this government is to make it realistic without hurting the interest of the farmers and at this time I would ideally want all political parties to apply their mind because eventually these are not going to happen just in Delhi where the central government is, actually these policies and these acts with all the compensation and other things which are entailed in it will have to be implemented at the states and in states, different parties are in power in different states. If unless all of us apply our mind to say is this realistic to wait for an investor be him Indian or somebody who comes from abroad, 60 months to get a social impact assessment where there is a displacement and then he decides alright from that day – it doesn’t work out. So, I would think every political party, not just on the SIA but many other such clauses on which all of us will have to equally be concerned as much as about the farmer, about the investor, about the job potential that investment will bring in because after all in that area farmers also may want their children to get jobs, others may also want to get jobs. Unless you are going to make investments happen in a such a way that the farmer is not deprived of compensation, right compensation, just compensation as much as the investor is also not made to sit with his money lying unproductive as equally the person who is searching for jobs in his area saying when am I going to get jobs. I can’t anymore get into agriculture because it is already full of under employment. I need to be out of it but within my area. So, for creating jobs, for investments to become meaningful and quick and also farmers to get the benefit, all political parties will have to apply their mind. Q: Congress is unwilling to even yield on this matter. They are saying that this is something which they are not going to accept. Given that fact, then are states the next? A: Congress’s unwillingness to me is a bit unfair because all that we are talking about is if you think these features on the 2013 act was much better, why would your state Chief Minister say no we are not able to procure using 2013 act and for those specific hindrances which the state Chief Minster’s are voicing can we now amend it to mean something else? Q: My last question and this is regarding the parliament session. It was for us who were covering it, even for us it was not a good experience seeing such chaos during the entire session especially in the Rajya Sabha. Going forward, how do you take forward reforms because it seems no matter which party is in power or no matter which party is in opposition, reforms becomes the victim. Given this fact how do you ensure that reforms are taken forward, reforms do not get stuck because of political differences? What according to you is the way forward on this?A: This government is committed to reforms. We shall definitely keep moving forward on that agenda. What happened in the parliament is something I am not going to comment; every one of us has seen it. Ideally I think, during this intermission every political party is going to be given a word or two by the general public because we after all link and interact with the people, we shall be told by the people as to whether they liked it or not and I am sure we will be mature enough to come back and understand that all of us have a role to keep the parliament working. We should have the parliament discuss things; disagree as much as you want but you cannot have the parliament not working. Q: Is special session an option to take forward some very important legislative agenda? A: We don’t know yet because the parliament is still not prorogued, I am sure the cabinet committee on this matter will take a call.