Relief pills fail to provide booster dose to pharma majors

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: The $14-billion Indian pharmaceuticals industry seems to have given thumbs down to the measures announced in Budget 2009-10. It feels the dosage received is not a booster for sustained growth. Relief pills that the industry was seeking on tax holiday, R&D, export incentives and measures to spur the domestic pharmaceutical market have not been met. The reduction in customs duty on certain life-saving drugs and specified life-saving devices too has failed to lift the sentiment in the pharmaceutical industry. Net result: the prescription for growth of the industry appears to have gone awry.

Satish Reddy, managing director & COO, Dr Reddy’s Laboratories says, “It has not been a bold budget as expected by many. So, no cheer for the markets.” Here’s how the hopes have been belied. The industry had specifically demanded an exclusive ministry in order to get an industry status. However, there was no mention of this.

The pharmaceutical industry had demanded a Rs 1,000 crore fund to support small and medium businesses (SMB) for meeting the Schedule M compliance, an essential criteria to enter the developed markets. It had asked for a long-term commitment with a dedicated fund, apart from a special fund for carrying out task force related activities, which too were not considered.

Extension of the weighted deduction of 150% on expenditure incurred on in-house R&D falls way short of the industry’s expectations. It was eying an increase in the weighted deduction for R&D to 200%. Also, the industry was hopeful that the expenditure incidental to research carried on outside the R&D facility, including clinical trials and bio-equivalence studies, would be brought within the ambit of weighted deduction. Much to their disappointment, the recommendations have not been addressed. Also, the proposal to introduce better tax benefits such as research tax credits for set off against corporate tax liability have not been addressed.

“The pharma industry did not see their demands being met, except the R&D benefits being extended till 2011 and no increase in customs duty. However, the industry would have greatly benefited if the FM had announced a 10-year extension of tax benefits for standalone R&D entities and offered incentives to pharma companies for R&D in the country,” says D Sucheth Rao, CEO, Neuland Laboratories.