The misuse has forced the finance ministry to look at developing a proper monitoring mechanism to keep track of such imports. The ministry is also keen to commission a more comprehensive study/survey on the actual incidence of pass-through exemptions.
The ministry is awaiting inputs from various ministries, including ministries of health and chemicals and fertilisers, on the proposed pricing-monitoring mechanism, the appropriate agency and periodicity of review. There is also a proposal to set guidelines and parameters/norms for establishing the misuse of nil duty or the pass-through.
In the last budget, levy of customs duty was exempted on sevoflurance and leuprolide acetate. But, later it was discovered by National Pharmaceutical Pricing Authority (NPPA) that the importers of these drugs were misusing nil customs duty as the benefit was not passed on to the consumers.
The finance ministry is already in talks with the health ministry to evolve a consensus on the approach to customs duty exemptions for life-saving drugs particularly on the issue that no further requests for exemption need be considered in the absence of an undertaking from the importer that the benefits will be passed through and a monitoring mechanism to keep track of such undertakings.
The finance ministry is also considering a proposal to exempt customs duty on life saving drugs provided the importers are willing to subject the drugs to price control under para 10 of Drug Price Control
Order (DPCO), 1995, and pass on the benefit of exemption to consumers. It has been argued that the only way to safeguard the interests of the consumers under the law is to control the sale price of the drug under DPCO.
At present, 253 drugs and formulations are exempt from customs duty on the ground of being life saving in nature. However, there is no mechanism in place to monitor wether the benefit of such exemption is passed on to the consumer.
The duty is exempted on imports provided the drug/kit/equipment is not manufactured in the country or the indigenous production is not sufficient to meet the domestic demand. Further, the drug has to be registered in India with the Drug Controller General of India (DCGI) and it is essential in terms of life saving/prolonging or improving quality of life of the patient.