In a move that may lead to lower prices for pharma products, the government is finalising a proposal to slash the excise duty on drugs and pharmaceuticals from the present level of 16% to 8%.
Further, for small-scale industries in the pharma sector, the government plans to raise the turnover exemption limit for levying excise to Rs 5 crore from the present Rs 1 crore.
These are being considered to offset the adverse impact on the industry following two policy decisions: introduction of area-based tax exemption since January, 2003 for industrial units set up in states like Uttarakhand and Himachal Pradesh, and shifting base for assessment of excise from ex-factory price to maximum retail price (MRP) with effect from January, 2005.
There is good news for small- and medium-scale enterprises in the sector too. A proposal is being worked out to extend a 5% interest subsidy on the loan amount taken by small- and medium-sector drug manufacturers to help them adhere to good manufacturing practices (GMP) and implement Schedule M required to manufacture sensitive pharmaceutical products like penicillin or biological preparations with live micro-organisms in keeping with WHO norms.
The subsidy is estimated to cost the government exchequer about Rs 560 crore during the 11 th Plan.
There are about 8,000 small pharmaceutical units who are expected to benefit from the interest subsidy as they need financial help for upgrading their infrastructure to meet GMP norms.
According to data from the office of the development commissioner, small-scale industries, contribution of SSI in Indian pharma market is 50% by volume and 30% by value.
Comprehensive changes in the regulatory system are also expected to be introduced in the current Plan period to keep pace with the changing trends in the pharma industry to maintain uniform parameters for producing quality drugs and ensure international standards in labeling and packaging. The sector is expected to get Rs 3,560 crore in the current Plan period to undertake the necessary changes and ensure adherence to GMP norms.
About Rs 250 crore will be spent on setting up 10 pharma parks (separate for bulk and for formulations) to improve infrastructure.