The Telegraph
Since 1st March, 1999
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Pharma sector gets the needed tonic

New Delhi, March 1: If one were to point out one industry, which is really upbeat about the budget this year, it would be the Indian pharmaceutical industry.

“This is the best budget for the pharmaceutical industry in the last three years. We have got everything we have asked for,” said an elated D.G Shah, secretary general of Indian Pharmaceutical Alliance (IPA).

IPA is an association of 11 major domestic companies including Ranbaxy, Dr Reddy’s Laboratories, Wockhardt, Sun, Lupin, Torrent and Alembic.

It is proposed in the budget to reduce the customs duty on life-saving equipment from 25 per cent to five per cent. On the other hand, those life-saving drugs made by companies here which at present attract 5 per cent from customs will also be exempt from excise.

Shah said that for the first time a level playing field will be brought for domestic manufacturer of life saving drugs About 150 drugs made in the country will be benefited by the move, including quite a few anti-cancer drugs being made by Cipla. Sun Pharmaceuticals is also going to gain from the move, said industry experts.

On its part, IPA had been for long lobbying with the government to reduce the excise duty on a list of life saving drugs, which were imported at cheaper rates.

Shah’s point was carried further by Rajiv Gulati, managing director of Eli Lilly and Company (India) Limited: “Excise and duty rationalisation in life-saving drugs has brought about level playing field for both Indian and multinational companies,” he said.

On the sop given for clinical research, research-based companies were elated. Gulati said, “I am happiest that the customs duty and excise duty has been abolished for material needed for clinical research. This will give a big boost to clinical research in India,” said Gulati. He added that the direction given to health in terms of infrastructure will lead to opening of new hospitals, giving an indirect boost to the industry.”

Ajay Vij, vice-president, pharmaceuticals, Dabur Pharmaceuticals said, “It is a very progressive budget for the pharma sector. Reduction of peak import duty is a welcome move. Excise exemptions on life saving drugs is a step in the right direction.”

However, Vij said the definition and scope of drugs covered under this category could have been widened.

In another major boost to the industry, finance minister announced that all the benefits listed under health care will also promote pharmaceutical industry. Moreover, income tax concessions for the pharmaceuticals industry (as also bio-technology) will be on a par with the information technology (IT) sector.

“In tune with the IT industry, now income derived in the pharmaceutical industry from intellectual property will be exempt from income tax and this will give a big boost to the industry, Shah said.

Dwelling on another key issue Vij said, “Increase in the overall limit for overseas investments, from 50 per cent of net worth to 100 per cent, through the automatic route is a favourable development for opening up subsidiaries abroad. Pharma sector is now more focused on exports, simplification of processes announced by the minister would improve efficiencies.”

In yet another sop to the pharmaceutical and bio-technology sector, the government has decided to remove the restrictions of minimum export obligation of Rs 20 crore for availing exemptions from customs duty for specified equipment.

Basic customs duty on glucometer and strips will be reduced from 10 to 5 per cent.

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