Levying access fees on companies- The best approach to conservation? A critique on the Access and Benefit Sharing Guidelines, 2014

A wide range of industries such as biotech, pharma, forestry, herbal, food, etc., use biological resources which are regulated under Biological Diversity Act, 2002 (BDA) and related Rules of 2004. This legislation also laid down provisions pertaining to access and sharing of benefits (ABS) from commercial utilization of these resources. A legislation which came pursuant to the Convention on Biological Diversity until recently did not have clear provisions on how exactly the ABS mechanism would work in India. After ratifying the Nagoya Protocol on ABS, it became imminent for the National Biodiversity Authority to come out with guidelines in 2014 which is following the Protocol to some extent as the Preamble to these guidelines state.

Providing for benefit-sharing in both monetary and non-monetary modes, the guidelines have slabs for different ranges of companies. The benefit-sharing slabs for domestic companies are 0.1 per cent, 0.2 per cent and 0.5 per cent on annual ex-factory gross sales of a product, depending on if the sales are less than Rs.1 crore, between Rs.1-5 crore and above Rs.5 crore, respectively. Foreign companies have to pay double the rate — so between 0.2 per cent and 1 per cent — in the three slabs. For bulk exports, benefit-sharing is 3 to 5 per cent of the total Free on Board value of resources. For different categories of transfer of research and intellectual property rights, benefit-sharing ranges from 0.5 to 5 per cent. Benefits described above will contribute into the National Biodiversity Fund for sharing with the State Biodiversity Boards (SBBs), Biodiversity Management Committees (BMCs) and local communities from whom resources or related knowledge were accessed.

Following the notification of these guidelines on November 21st, 2014, several SBBs started sending notices to companies utilizing biological resources with special focus on Ayurvedic companies, creating chaos and confusion amongst these companies due to lack of sensitization and awareness creation. For instance, there is no clarity on the year from which tax will be levied. Many of the companies are only paying out of fear, because according to Section 7 and 24(2) of the Act, organisations extracting plant based material for commercial purpose without intimation to State Biodiversity Board are liable under Section 55(2) of the Act and shall be punishable with imprisonment which may extend up to three years with fine or five years with fine or both. Ayurvedic industry in the state of Gujarat has urged the Centre to postpone the implementation of ABS tax so that the industry can better adjust to these changes. They also urged the government to consider reducing the percentage on the tax levied, especially for the small-scale manufacturers so that they are not burdened by the same. Their most important advice to the government is to sensitise the industry clearly on the tax structure and the modalities of it, so that stakeholders are clearly informed on all the aspects.

Worst hit are the Ayurvedic medicines’ manufacturing companies which are mostly made up of small scale or cottage scale industries with an annual turnover of less than Rs.1 crore. On a perusal of the BDA, Rules and Guidelines, it can be seen that as per section 7 of the Act, a ‘citizen resident in India’ is supposed to give only prior intimation to the Board on access of biological resources for commercial utilisation. The guidelines framed under section 18(1) and 21(4) of BDA, 2002 covers only activities under sections 3, 4, 5, and 6 which does not include domestic manufacturers, thus taxing them under these guidelines seems to be an incorrect approach.  Moreover, as per section 23 and 24 of the BDA, there is no specific mention about collection of ABS from Indian companies. Further, under section 32 there are only 3 sources of revenue specified for State Biodiversity Fund and none of them refer to the collection of ABS fees. Under section 21, subsection (2), there is a clear mention about NBA charging benefit sharing, however, this section is applicable only to non-Indian companies as described in section 3(2) of the Act.

Another lacuna with respect to the guidelines is that a proper distinction has been made between biological resources and value-added products with the latter being exempted from application of these guidelines. Definition of “biological resources” clearly indicate plants, animals and micro-organisms or parts, their genetic material and by-products with actual or potential use or value; and “value added products” means products which may contain portions or extracts of plants and animals in unrecognizable and physically inseparable form. Now it is unclear whether Ayurvedic medicines or for that matter, any of the processed food products come within the former or latter category.

There is also no clarity on whether cultivated bio-resource comes within biological resources or not. Unless these matters are not resolved, the guidelines will only create more hurdles to the true purpose of BDA, i.e. conservation.

(Blogger: Shyama Kuriakose)