The finance minister, while placing the Finance Bill in Parliament on Wednesday, had announced the creation of a Rs 150 crore corpus for promoting R&D in the pharmaceutical sector, raised the weighted deductions for expenses incurred by pharma and biotechnology companies from 125 per cent to 150 per cent and declared a 10 year tax holiday for R&D focussed companies.

Addressing a press conference in the Capital, Prabhu said that the new measures would give a big boost to the ministry's programme of attracting investments into R&D. "Once a conducive environment for R&D is in place in the country, foreign investment too would flow in."

The minister added that costs of conducting research in India was very low compared to the developed world and the fact would help in attracting investments from abroad.

The Indian pharma industry, at present, invests a mere 3-4 per cent of its total turnover into R&D against the world average of 18-20 per cent. The minister said that the investments too are skewed with just a handful of companies actually engaging in R&D while the majority steers completely away from it.

However, Prabhu said, with the IPR regime being implemented in the year 2005, the entire pharma industry had to work on creating new molecules and new processes to retain their competitiveness in the market. "With the finance minister conceding to the demands of the industry, manufacturers should now have no complaints about R&D incentives and take it on immediately."

While admitting that the Rs 150 crore corpus for encouraging R&D was a small amount, the minister said that it could be enhanced from time to time. Besides, the fund could also be supplemented by investments from the private sector. "The finance ministry has kick-started a process by creating the fund. We are hopeful that the process would continue." Prabhu said that procedures for utilisation of the fund would be in place soon and the industry would be able to access it in another three-four months.