Patanjali plea in court: Swadeshi firms need not share revenue with farmers

Asked to share Rs 20 mn from its Rs 4 bn FY15 revenue with farmers who protect and grow bioresources it uses, Ramdev's pharmacy claims Biodiversity Act exempts Indian entities from sharing benefits

Should ‘Swadeshi’ companies have to share with farmers the huge profits and benefits they derive from selling India’s bioresources as their ‘herbal’ and ‘ayurvedic’ products? Or are only ‘foreign companies’ required to provide monetary and non-monetary benefits to the people who grow, protect and conserve India’s biodiversity?

Baba Ramdev’s Patanjali conglomerate, with a self-declared annual revenue of more than Rs 100 billion, contends that state authorities do not have the power to collect such a levy from it because it is a wholly Indian entity. Only foreign nationals and entities, according to the group, are required to share benefits derived from exploiting natural resources for commercial gains.

Patanjali has moved the Uttarakhand High Court with this plea to challenge the Union and Uttarakhand governments’ demands. If it wins the case, the favourable ruling could potentially save the group from similar demands in other parts of the country where it has been expanding for raw material collection. It could also provide several other Indian brands like Dabur and Himalaya which sell ‘ayurvedic’ and ‘herbal’ medicines and cosmetics with an additional legally sanctioned business advantage over multinational brands. Many other Indian companies that use biological resources as raw inputs, such as the paper and pulp industry, could also stand to benefit if the Patanjali group wins the case.

The Uttarakhand HC case, filed in 2016 by Ramdev’s Hardiwar-based Divya Yoga Mandir Trust when the state government asked its pharma unit Divya Pharmacy to share Rs 20.4 million of its Rs 4.21-billion revenue in 2014-15 with farmers as part of a legal obligation, has now reached the hearing stage.

The state contended that under the Biodiversity Act all entities, whether foreign or Indian, were required to share a part of the revenue made from exploiting biodiversity with people who lived in the villages from where biological resources were extracted for raw material.

The Patanjali group has challenged the central government’s regulations requiring this sharing of revenue with villagers and taken the Union government, the National Biodiversity Board, the Uttarakhand state government and the Uttarakhand state biodiversity board to court over the issue. Business Standard reviewed the petition filed by Ramdev’s trust and the original orders of the Uttarakhand government telling the company to pay up.

Ramdev’s trust has said in its plea that the regulations permitting state authorities to collect this levy from ‘Indians and Indian organisations for commercial utilisation of biological resources occurring in India’ are against the law. Interestingly, the trust has contended that sharing of such benefits with local people is against the right to equality enshrined in Article 14 of the Constitution. It has also said that the regulations levying this charge tantamount to imposition of ‘unreasonable restrictions over fundamental rights to livelihood and business enshrined in Article 19(1)(g) of the Constitution.

On the other hand, in the event of a failure of Patanjali’s plea for throwing out of the regulations in entirety, the trust has also pleaded as a secondary option that in the specific state government orders, the figure of Rs 20.4 million asked to be paid was arrived at in an arbitrary fashion, was devoid of sufficient reasoning, and violated the trust’s right to equality and its right to livelihood and business, by raising an ‘exorbitant, unreasonable demand of money’ which is not based in law.

Kanchi Kohli, an independent legal expert who has extensively researched on the subject, says: “The idea of regulating access and operationalising benefit sharing for both Indian and foreign entities is within the framework of the law. Several Indian companies are using biological material and people's knowledge primarily for profit-based commercial applications. It is critical that provisions for sharing benefits are not watered down.”

Sharing benefits

The Biodiversity Act was passed in 2002 as part of India’s international commitment to a UN Convention on Biodiversity, which India strongly advocated for and then ratified. The convention and the law came in recognition of the fact that many industries, such as the pharmaceutical industry, often use many natural resources such as herbs and plant extracts which communities have protected and grown over decades and centuries. But, the local communities get paid a pittance for it, if at all. To ensure a more equitable sharing of benefits arising from exploitation of these resources, the international community decided to put in place what is called an ‘Access and Benefit Sharing or ABS’ regime. India did so through regulations under the Biodiversity Act in 2014.

Under the regulations, a manufacturer has two options when it deals with the state authority instead of local bodies. It can either pay a levy of 3-5 per cent on the cost price of biological resources extracted or 0.01 to 0.05 per cent of annual gross ex-factory sales of finished goods that contain one or more biological resources extracted from the state. The exact amount is determined after negotiations with the entity to ensure the permissible exemptions are all accounted for.

The Patanjali case

By his own claim Baba Ramdev’s Divya Pharmacy alone notched a turnover of over Rs 8 billion in 2016-17. The pharmacy, part of his Patanjali Yogpeeth Trust that started in 1995, sells products largely produced from plant and other natural resource extracts grown or collected from the biodiversity-rich hills of Uttarakhand.

The ‘swadeshi’ ‘herbal’ and ’ayurvedic’ branding has helped Patanjali become the fastest-growing FMCG portfolio in India. Patanjali group claims it is not there just for the sake of profits. It has a much higher spiritual and national calling. The pharmacy also promises to generate employment for the local people and allow farmers full return for their produce.

Authorities contend that once the law was in place in 2002, the pharmacy should have taken permission for extracting biological resources from the state. So, in 2013, the state biodiversity board sent a notice to the company for the first time, asking it to provide details so that the charges could be decided. Though the authorities are empowered to stop any commercial exploitation of resources till all legal formalities are over, they did not do so.

Ramdev’s trust claims, the authorities did not respond to its reply for three years and then in 2016 got back seeking details of the pharmacy’s sales for 2014-16. Documents show that 12 rounds of meetings were held between the trust and the authority by September 2016. After that, the board calculated, taking into account all exemptions provided, that Ramdev’s Divya pharmacy owed the state Rs 20.4 million. It made a formal demand for that amount.

After prolonged negotiations, Ramdev’s trust said it disagreed with the board on the calculation of the levy. It said it believed it owed the government only Rs 6.34 million. It deposited that sum. Till then, it had not challenged the validity of the levy on ‘Indian’ entities.

But, it later filed a case in the state’s high court and in the petition it claimed for the first time that the law did not require Indians and Indian entities to share with people the benefits from exploiting natural resources for commercial purposes.

It has pleaded that the Biodiversity Act of 2002 only provided for foreign nationals and entities to be charged under the access and benefit-sharing provisions.

It has not asked for a stay on the Uttarakhand authorities’ order and instead pleaded that the regulations asking Indian entities to pay or even take permission from state authorities to extract biological resources is illegal. It has asked for quashing of the state government’s orders. And, as a third option, it has asked the court to prevent the state government from charging the levy for a period when the regulations were not in place, even as the law was.

Patanjali is not the only group in Uttarakhand which has received notices from the state authorities to pay up. In fact, Uttarakhand and Madhya Pradesh state governments have been the most active on this front since the regulations were put in place. But, this is also not the first such challenge to the regulation. There is another case in Maharashtra where the petitioner has contended that Indian entities do not need to pay people; the case is being heard. In the Patanjali case in Uttarakhand, the state biodiversity board has so far stood its ground. The Union government is yet to present its case, though the official documentation of the Union environment, forests and climate change ministry so far claims that Indian entities are also required to pay the levy and share the benefits of commercial exploitation of the country’s biological resources with people.