A recent news report stated that the Planning Commission has advocated putting in place a “proper regulatory mechanism” before permitting the use of genetic modification in Indian crops.  A recent Standing Committee report on genetically modified (GM) crops found shortcomings in the regulatory framework for such crops.  The current framework is regulated primarily by two bodies: the Genetic Engineering Appraisal Committee (GEAC) and the Review Committee on Genetic Manipulation (RCGM).  Given the inadequacy of the regulatory framework, the Standing Committee recommended that all research and development activities on transgenic crops be carried out only in containment (in laboratories) and that ongoing field trials in all states be discontinued.  The blog provides a brief background on GM crops, their regulation in India and the key recommendations of the Standing Committee. What is GM technology? GM crops are usually developed through the insertion or deletion of genes from plant cells.  Bt technology is a type of genetic modification in crops.  It was introduced in India with Bt cotton.  The debate around GM crops has revolved around issues of economic efficacy, human health, consumer choice and farmers’ rights.  Some advantages of Bt technology are that it increases crop yield, decreases the use of pesticides, and improves quality of crops.  However, the technology has also been known to cause crop loss due to resistance developed by pests and destruction of local crop varieties, impacting biodiversity. Approval process for commercial release of GM crops

  1. Initially, the company developing the GM crop undertakes several biosafety assessments including, environmental, food, and feed safety assessments in containment.
  2. This is followed by Bio-safety Research Trials which require prior approval of the regulators, the GEAC and the RCGM.
  3. Approval for environmental release is accorded by the GEAC after considering the findings of bio-safety studies.
  4. Finally, commercial release is permitted only for those GM crops found to be safe for humans and the environment.

Committee’s recommendations for strengthening the regulatory process The Standing Committee report found several shortcomings in the regulatory framework, some of which are as follows:

  • State governments are not mandatorily consulted for conducting open field trials on GM crops.  Several states such as Kerala and Bihar have opposed field trials for GM crops.  The Committee recommended that mandatory consultation with state governments be built into the regulatory process.
  • The key regulators, the GEAC and the RCGM, suffer from poor organisational set-up and infrastructure.  The Committee recommended that the regulatory framework be given statutory backing so that there is no scope for ambiguity or complacency on the part of the authorities responsible for the oversight of GM organisms.  It urged the government to introduce the Biotechnology Regulatory Authority Bill.
  • There is evidence that the GEAC has not complied with international treaties.  These include the Cartagena Protocol on Biosafety and the Rio Declaration on Environment and Development.  It recommended that legislation relating to liability and redress for damage arising from living modified organisms be enacted.
  • Some international scientists have raised doubts about the safety of Bt Brinjal and the way tests were conducted.  To remedy this situation, the Committee recognised the need for an overarching legislation on biosafety to ensure that biotechnology is introduced without compromising the safety of biodiversity, human and livestock health, and environmental protection.

Note that over the last few sessions of Parliament, the government has listed the Biotechnology Regulatory Authority Bill for introduction; however the Bill has not been introduced yet.  The Bill sets up an independent authority for the regulation of GM crops. For a PRS summary of the report and access to the full report, see here and here.

Recently, there have been instances of certain collective investment schemes (CISs) attempting to circumvent regulatory oversight.  In addition, some market participants have not complied with Securities and Exchange Board of India's (SEBI) orders of payment of penalty and refund to investors. In August, the Securities Laws (Amendment) Bill, 2013 was introduced in the Lok Sabha to amend the Securities and Exchange Board of India Act, 1992 (the SEBI Act, 1992), the Securities Contract (Regulation) Act, 1956 (SCRA, 1956) and the Depositories Act, 1996. The Bill replaced the Securities Laws (Amendments) Ordinance, 2013. The Bill makes the following key amendments: a) Definition of Collective Investment Schemes The SEBI Act, 1992 defines CISs as schemes in which the funds of investors are pooled, yield profits or income and are managed on behalf of investors.  It also exempts certain types of investments which are regulated by other authorities. The Bill introduces a proviso to the definition of CIS.  This proviso deems any scheme or arrangement to be a CIS if it meets all three of the following conditions: (a) funds are pooled, (b) it is not registered with SEBI, or it is not exempted by SEBI Act, 1992, and (c) it has a corpus of Rs 100 crore or more.  These provisions could potentially lead to some schemes not conventionally defined as CIS to fall under the definition. For instance, partnership firms operating in the investment business or real estate developers accepting customer advances could be termed as CISs. SEBI has been given the power to specify conditions under which any scheme or arrangement can be defined as a CIS. This raises the question of whether this is excessive delegation of legislative powers - usually the parent act defines the entities to be regulated and the details are entrusted to the regulator. b) Disgorgement (repayment) of unfair gains/ averted losses SEBI has in the past issued orders directing market participants to refund i) profits made or ii) losses averted, through unfair actions.  The Bill deems SEBI to have always had the power to direct a market participant to disgorge unfair gains made/losses averted, without approaching a court.  This power to order disgorgement without approaching a court is in contrast with the provisions of the recently passed Companies Bill, 2011 and the draft Indian Financial Code (IFC) which require an order from a court/tribunal for disgorgement of unfair gains. Further, the Bill specifies that the disgorged amount shall be credited to the Investor Education and Protection Fund (IEPF), and shall be used in accordance with SEBI regulations.  The Bill does not explicitly provide the first right on the disgorged funds to those who suffered wrongful losses due to the unfair actions, unlike the draft IFC. c) Investigation and prosecution The Bill empowers the SEBI chairman to authorise search and seizure operations on a suspect’s premises.  This does away with the current requirement of permission from a Judicial Magistrate.  This provision removes the usual safeguards regarding search and seizure as seen in the Code of Criminal Procedure, 1973, the recently passed Companies Bill, 2011 and the draft Indian Financial Code. The Bill also empowers an authorised SEBI officer to, without approaching a court, attach a person’s bank accounts and property and even arrest and detain the person in prison for non-compliance of a disgorgement order or penalty order.  Most regulators and authorities, with the exception of the Department of Income Tax, do not have powers to such an extent. d) Other Provisions of the Bill The Bill retrospectively validates consent guidelines issued by SEBI in 2007 under which SEBI can settle non-criminal cases through consent orders, i.e., parties can make out-of-court settlements through payment of fine/compensation.  The United States Securities and Exchange Commission settles over 90% of non-criminal cases by consent orders. The Bill retrospectively validates the exchange of information between SEBI and foreign securities regulators through MoUs. The Bill sets up special courts to try cases relating to offences under the SEBI Act, 1992. For a PRS summary of the Bill, here.