Why India’s ambitious R&D fund of Rs 1 lakh crore needs a robust law

The government’s think-tank NITI Aayog in April released a report on the Ease of Doing Research in India. Seventy-six percent of the respondents said the industry rarely supported funding for projects in their discipline.

This is hardly a surprise.

Private investment in R&D in India has historically been very low, even in sectors like the pharmaceutical industry where private corporations have made huge profits only to plough that excess capital into real-estate or failing movie studios. As a result, it has been the Indian state, not the private sector, which has traditionally had to cough up the capital for R&D in India.

Much of the Indian government’s funding for R&D is routed through various government institutions like the Technology Development Board, the Anusandhan National Research Foundation and the Biotechnology Industry Research Assistance Council. Typically, these bodies invite grant applications from industry and academia, which are assessed before making the final grants.

While this funding has generally been modest, in November, the Indian government announced an ambitious fund of Rs 1,00,000 crore for R&D for the public and private sector. Officially called the Research Development & Innovation fund, it will be funded through loans and equity investments.

The Research Development and Innovation scheme targets sunrise sectors as well as sectors important for economic security and strategic purposes. Earlier this year, energy security, deep technology, including quantum computing and artificial intelligence, were identified as priority sectors under the RDI scheme.

The first tranche Rs 20,000 crore for the scheme was released in the last budget. These funds are to be administered through the Anusandhan National Research Foundation as the first-level custodian of funds. Other government bodies like the Biotechnology Industry Research Assistance Council, the Technology Development Board, and non-banking financial corporations as second-level fund managers – “SLFM”. This is a significant increase in government spending on R&D. For contrast, the Biotechnology Industry Research Assistance Council, since its inception in 2012, has reportedly disbursed only Rs 4,200 crore in grants.

While increasing government funding for R&D is always welcome, questions have been raised whether increased funding, without a reform of the culture of “red tape” in public universities and public research institutions, will achieve any significant outcomes, especially when the focus is on applied research and industry collaborations. To this, there are two more specific concerns: transparency and intellectual property management.

A legal framework for transparency

When Parliament gives the bureaucracy complete discretion to disburse Rs 1 lakh crore, one would have expected the government to create a legal framework to ensure transparency in how these funding decisions are made by those in charge of disbursing the funds.

In particular, these funding bodies should be releasing elaborate information on who exactly is making these funding decisions, while also making funding agreements available to the public with appropriate redactions. This does not happen in India.

Take, for example, the Biotechnology Industry Research Assistance Council. It makes publicly available a list of projects it has funded, but it will fight a citizen to death if asked to disclose its funding agreements under the Right to Information Act.

This is unlike the position in the United States, where the “grants policy” of the National Institutes for Health clearly states that most information related to grants will be made publicly available:

“Except for certain types of information that may be considered proprietary or private information that cannot be released, most grant-related information submitted to NIH by the applicant or recipient in the application or in the post-award phase is considered public information and, once an award is made, is subject to possible release to individuals or organizations outside NIH.”

The policy emphasises that this information is made public “to foster an open system of government and accountability for governmental programs and expenditures and, in the case of research, to provide information about federally funded activities”.

Neither the Anusandhan National Research Foundation nor the Biotechnology Industry Research Assistance Council, nor the Technology Development Board, have a similar clause on their websites. Without such disclosures, it is impossible for civil society to hold accountable either the funding bodies or those receiving public funding from these bodies.

These are important questions to ask at this stage because of the experience during the Covid-19 pandemic when the BIRAC handed out crores of public money to Indian pharmaceutical companies to develop new vaccines but refused to make publicly available the funding agreements even when some of these projects got caught up in controversy.

Take for example, the mRNA vaccine developed by Gennova Pharmaceuticals with significant financial assistance from the Biotechnology Industry Research Assistance Council. The government touted the vaccine as a symbol of India’s self-reliance in vaccine technology. It then came to light that an American biotech company had alleged that Gennova had stolen its trade secrets related to the mRNA vaccine and initiated litigation against the Indian company. Both parties eventually settled the dispute out of court.

There was barely a word from Biotechnology Industry Research Assistance Council while this controversy was playing out in the courts and nobody knows how the public funding granted to Gennova was utilised by the company. Similarly, due to the opacity regarding funding agreement, it is impossible to know whether the Biotechnology Industry Research Assistance Council negotiated a requirement for Gennova to share its publicly-funded mRNA technology with India’s relatively large public sector vaccine industry. The Council refused to make publicly available the funding agreement under the RTI Act.

A second example on why transparency is important, is the case of Covaxin, the vaccine developed by Bharat Biotech in collaboration with the Indian Council for Medical Research, with funding from the government.

During the pandemic, the Indian Council for Medical Research refused to make available the funding agreement with Bharat Biotech available under the RTI Act – however some aspects of the MoU had to be disclosed in Parliament because of questions raised by the Opposition. Later, it came to light that Bharat Biotech had filed patent applications for Covaxin without including the Indian Council for Medical Research as a co-patentee or its scientists as co-inventors.

Only after the issue was raised in Parliament did Bharat Biotech move to include the Indian Council for Medical Research as a co-patentee. This was possible only because the Opposition had asked the government to disclose the terms of the MoU during the pandemic.

These concerns of transparency are severely magnified in the context of Anusandhan National Research Foundation, given its budget of Rs 20,000 crore for just one year.

As of today, the ANRF Act is lacking in statutory safeguards mandating transparency. At most this law requires grantees to submit a “statement of expenditure” and “utilisation certificate” but these statements reveal little useful information. Hopefully the Foundation will develop a transparency charter before waiting for the first controversy to make it to the news.

The Intellectual Property issue

A second issue pertains to the intellectual property in the research generated from public funding provided by the RDI Fund. Like many other countries, India has traditionally allowed private companies to seek patents, in their name, for inventions resulting from public funded research.

The terms on which such intellectual property can be commercialised, the royalty rates payable to the government and the terms on which the invention can be used in public interest by the state is generally determined by the funding agreement between the funding body and the recipient. This is not ideal because it delegated a lot of discretion to the bureaucracy which makes these decisions in complete secrecy.

Other countries, such as the United States, have enacted laws like the Bayh-Dole Act to regulate public funding of research and development. This law also secures public interest in all intellectual property generated through federal funding. For example, in certain cases of public emergency or non-commercialisation or national security, the Bayh Dole Act allows the American state “march-in” rights to protect public interest by over-riding exclusive patent rights.

The ANRF Act, 2023 enacted by Parliament is silent about the intellectual property generated via public funding. A few months ago, the Anusandhan National Research Foundation publicly announced an IP policy, which provides some “guiding principles” for grants that it makes. For instance, on the issue of “march in” rights, the ANRF’s policy document states the following:

Any licensing arrangement should consider preserving for the Government of India the irrevocable, royalty-free right to practice or require the licensee to grant sub-licenses to responsible applicants, on reasonable terms, when it may be necessary to fulfil public interest, including, health or safety or security needs of the country. This is without prejudice to the right of the Government of India under law for compulsory licensing.

As the language above indicates, crucial decision-making powers regarding IP are delegated to unknown bureaucrats at ANRF – the policy only makes a non-binding recommendation.

Enforcing “march-in” rights through contractual agreements or via the remedies under the Patents Act, (such as compulsory licensing or “government use” provisions) tends to be legally complicated and may require payment of reasonable compensation, thereby opening the door for litigation and delaying the ability of the government to use the new technology in public interest. It is easier to achieve these objectives through statutory safeguards in a law.

Robust legal framework

In the past, India has attempted to enact its own version of the Bayh Dole Act, after a recommendation on these lines was made by the erstwhile National Knowledge Commission. That attempt failed in 2010 after a poorly drafted legislation was torpedoed by a Parliamentary Standing Committee.

Since then, the bureaucracy in control of India’s scientific establishment has preferred to tackle these issues through guidelines, instead of a binding statutory law which guarantees transparency and accountability. The bureaucracy seems reluctant to recommend a legislation to govern public-funded intellectual property since that would curb the vast and opaque discretionary powers they enjoy right now.

Hopefully the political establishment will soon realise that it is a bad idea to hand over Rs 1,00,000 crores to this bureaucracy without having in place a robust legislative framework to ensure both transparency and protection of public interest in the IP generated through the funding.

Prashant Reddy T is the coauthor of Create, Copy, Disrupt: India’s Intellectual Property Dilemmas (OUP). Yogesh Byadwal is a final year student at NLSIU.