NEW DELHI – A significant boost to India’s Department of Biotechnology (DBT) in the country’s latest budget has nevertheless left the domestic industry unimpressed and unenthused, with critics noting there are few new incentives to help the sector.

Under the new budget, the DBT will get $330 million (Rs22.22 billion), a relatively decent hike of 22 percent. DBT Secretary Krishnaswamy Vijay Raghavan said the hike will help DBT to continue implementing its ambitious national biotech strategy announced in December 2015. The strategy aims to increase the sector’s turnover to $100 billion by 2025, from the current $7 billion. (See BioWorld Today, Jan. 14, 2016.)

Biopharma players, however, remain unconvinced that current allocation levels will be sufficient to build a successful ecosystem.

“So far [there is] nothing path-breaking to suggest [a] bold budget,” tweeted Kiran Mazumdar Shaw, managing director of Bengaluru-based Biocon Ltd.

Shaw and several leading Indian academics pointed out that the overall science and technology allocation “has been almost static, which does not augur well for the future of our country, which is aiming to build a credible scientific and engineering profile.”

That static investment has repercussions for the country’s biotechnology industry. Shaw said that it was “vital for the government to increase allocation to science and technology and encourage research in the public and private sectors by providing an enabling ecosystem and fiscal incentives.”

Incentives such as tax credits and enhanced tax deductions are key to that strategy as they allow research-oriented organizations to effectively leverage their R&D prowess for creating valuable intellectual property, Shaw said.

“This budget did not have incentives to spur high-end innovation in the country such as a tax sops for patent filings, or customs and excise duty exemptions for sophisticated laboratory equipment.

“It also did nothing to address industry concerns over the gradual phasing out of the weighted tax deduction on expenditure incurred on scientific research. It is imperative for the government to pay attention to science and technology in order to foster research, innovation and education in enabling technologies that can propel India into the future,” she added.

Utkarsh Palnitkar, a partner and head of life sciences at KPMG in India, agreed that India’s life sciences sector “had great expectations’ from the [2017] budget, not only from a fiscal incentives perspective, but also from a regulatory angle; more so, given the government’s vision of making India one of the top three pharmaceutical markets by 2020.

“However, this year, too, no specific impetus was given to the sector,” he said. “While the move to eradicate certain diseases, the proposal to set up two new All India Institutes of Medical Sciences, additional post-graduate medical seats, proposed amendments in the Drugs and Cosmetics Rules and new rules for medical devices are welcome, the budget has not specifically addressed imminent challenges directly affecting the sector.”

Palnitkar pointed out that in order to stay competitive in the overseas market – and given the uncertain global climate – “it was expected that specific impetus or incentives would be given to innovation in the form of weighted deduction on R&D, incentives for patents, exemptions of certain duties and taxes, etc.”

“These demands remained largely unaddressed, giving no specific reason to cheer for the sector as a whole in 2017-18,” he said.

Meanwhile, Krishna Ella, founder of Bharat Biotech International Ltd., said he felt the 2017 budget “has forgotten [the] biotechnology and biopharma industry.”

Ella noted that it especially ignored certain aspects of startups. “There should have been incentives for venture capital or angel investments to incentivize them to put in more money in biotech startups and help the latter,” Ella told BioWorld Today. That is all more crucial as money for startups is drying up in India currently, after the initial hype that saw a mushrooming of startups in the country.

The budget also did not show the way forward to help biotech startups patent their innovations, he said. It is also silent on advancing the export potential of Indian biotech companies and on strengthening regulation in the sector, Ella added.

A FEW POSITIVES

Biocon’s Shaw did see some positive aspects, in the form of indirect benefits to India’s biotech sector.

“While there was nothing specific for Indian biotech in this budget, some of Finance Minister Arun Jaitley’s proposals could indirectly help the industry,” Shaw said. “The proposed abolition of the Foreign Investment Promotion Board, which offers a single-window clearance for FDI investments in India, could fast-track the inflow of FDI and allow foreign capital to come in to bolster India’s biotech sector. Foreign pharma and biotech companies can help bring in technological knowhow and share best manufacturing practices with local companies, thus helping them upgrade their systems and processes.”

Biotech startups also stand to benefit from the finance minister’s proposal to allow firms incorporated after March 31, 2016, to take advantage of a three-year tax holiday in the first seven years of their existence. Previously, the rebate could only be used in the first five years of operations.

The reduction in the corporate tax rate to 25 percent from 30 percent for medium and small enterprises with an annual turnover of up to $7.4 million (Rs500 million) could provide a fillip to biotech firms that fulfill the criteria, Shaw added.