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India boosting domestic drug manufacturing

Top multinational pharmaceutical companies have set up global capability centres

Question: My son, who is working for a pharmaceutical company based in Europe, wants to join the global capability centre that the company has set up in India. I would prefer that he continues with his present employment in Europe rather than shifting to India. Am I right in my views?

ANSWER: India is the hub for manufacturing pharmaceutical products including bulk drugs, vaccines, and affordable generic medicines. In the recent past, top multinational pharmaceutical companies have set up global capability centres (GCCs), mainly in Hyderabad and Bengaluru, which provide support functions such as clinical trials, pharmacovigilance, and drug safety. These cetnres are involved in drug discovery and help their parent companies to leverage emerging technologies like Gen AI.

New technologies developed in GCCs will provide personalised and precise care delivery. This will cut down hospitalisation costs and help the poor and needy. Global business services centres are also being set up, which provide analytical and technology support to ensure that the pharmaceutical product is ready to be marketed through pre-clinical trials’ analytics as well as data collation for getting regulatory approvals from government authorities. One of the largest European companies has set up its centre in Hyderabad employing more than 8,000 associates who are involved in clinical operations, technical research and development for medicines in the cardiovascular field, oncology, immunology, neurology and ophthalmology. Your son would be taking the right decision if he decides to shift to the European company’s GCC in India.

Question: In an earlier column you mentioned that electric vehicles including buses and scooters are increasingly being used on the roads in India. However, pollution from fossil fuel use is still continuing. Are steps being taken to tackle this issue?

ANSWER: While the use of fossil fuels like petrol and diesel will continue for at least ten more years, the Indian Government is going all out to promote ethanol blending of petrol. In 2024-25 it is expected that 20 per cent of petrol will be blended and by 2029-30 at least 30 per cent. Ethanol is produced from C-molasses, which is a by-product of sugar manufacturing factories. The blending of ethanol with petrol has been promoted by the government to reduce the country’s oil import costs, provide energy security and lower carbon emissions to improve air quality.

There are almost 10,000 retail outlets in India that sell E20 fuel. A cash incentive is given for the production of ethanol from heavy molasses. The government has permitted the utilisation of juice as well as heavy molasses for production of ethanol so that higher quantity is available for blending with petrol. At the COP28 summit held in December last year, India has taken a global leadership role in the biofuel supply chain with the launch of the global biofuels alliance.

Question: My brother-in-law, who is a resident of India, had opened a bank account in the UK and transferred funds from his Indian account under the rules permitted by the Reserve Bank of India. However, the bank is asking him to increase the amount of deposit or close the bank account. I do not understand what are the issues involved and the reason for this being done.

ANSWER: Under the liberalised remittance scheme of the Reserve Bank of India, a resident Indian is permitted to remit upto $250,000 every year, which can be invested in securities, immovable properties or can be used for travelling, education, medical expenses or for maintenance of relatives outside India. Under the recent guidelines of the Reserve Bank, the funds transferred to a foreign bank account cannot remain idle but must be invested in the above mentioned assets within 180 days of the funds being transferred. Failure to do so entails repatriation of the funds back to India.

Foreign banks are reluctant to accept deposits as many of them have a requirement of minimum balance of $1,000,000. Even the wealth management arm of the foreign banks has a minimum ticket for investment of funds in securities. This creates a difficult situation for resident Indians who are not able to comply with the minimum deposit/investment requirements of foreign banks. Hence, like your brother-in-law, many resident Indians are now repatriating the funds back to India and closing their overseas bank accounts.

HP Ranina is a practising lawyer, specialising in tax and corporate laws of India.