Union Budget 2020 India: The Medical Technology Association of India (MTaI), that represents mainly research-based medical technology companies, has said the cess imposed by the government on medical devices will lead to increase in cost of imported products and reduce affordability of healthcare.
This is against the basic ethos of Pradhan Mantri Jan Arogya Yojana (PMJAY) wherein government wants to provide affordable healthcare for all, MTaI said.
“A 5 per cent cess on custom duties for import has been imposed on medical devices in the budget which will increase the cost of the imported medical devices. Ultimately patients will bear this cost and affordability will decrease,” MTaI Director Sanjay Bhutani said in a statement.
This is a retrograde measure and goes against global companies which provide more than 80 per cent of critical care medical devices as well as the patient who gets exposed to the danger of smuggling of these low bulk and high value devices, without service & legal guarantees from neighbouring countries where the tariffs are already lower, he added.
“The domestic self-sufficiency argument of the government also needs to be taken with a grain of salt. We do hope the government has not looked at the classes of products, on which it plans to impose this cess, monolithically. As many sub categories of these classes would not be manufactured in India at all,” Bhutani said.
Finance Minister Nirmala Sitharaman on Saturday proposed to impose a nominal health cess on import of medical equipment to boost domestic medical devices sector and generate resources for health services.
“To achieve the twin objectives of giving impetus to the domestic industry and also to generate resource for health services, I propose to impose a nominal health cess, by way of a duty of customs, on the imports of medical equipment keeping in view that these goods are now being made significantly in India,” Sitharaman said.
The Association of Indian Medical Device Industry (AiMeD) also expressed disappointment and anguish over the Union Budget giving cold shoulder again to Indian medical device industry.
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“This year FM announces taxation will drive public healthcare funding but the fine print states it as cess so if duty on a device was 5 per cent it becomes 5.25 per cent effectively. Only a meagre increase of 0.25 per cent to protect domestic manufacturing and motivate traders to become manufacturers,” AiMeD Forum Coordinator Rajiv Nath said.
AiMeD was expecting the government to move forward on promised reforms and anticipated conducive measures to boost domestic manufacturing of medical devices, he added.
“It is frustrating that against our expectations, the government has not included any measures to help end the 80-90 per cent import dependence forced upon us and an ever increasing import bill of over Rs 38,837 crore and promoting growth of Indian medical device industry,” Nath said.
Though the health cess of 5 per cent on import of medical equipment will augment resources for funding of expenditure on healthcare sector, the hike will increase the cost of equipment, which is a near term negative for the players, ICRA Corporate Ratings Group Head & Senior VP Shubham Jain said.
“At Rs 67,484 crore, the budgetary allocation for healthcare sector for FY2021 will translate into modest 5.7 per cent increase vis-vis revised estimate of Rs 63,830 crore for FY2020. With a nominal estimated GDP growth of 10 per cent, this also translates into a fall in the public healthcare expenditure as a percentage of GDP,” he added.
Thus, the public sector spend on healthcare will continue to lag at below around 1.5 per cent of GDP, Jain said.
“Nonetheless, the proposal to set up hospitals in PPP mode in 112 districts is likely to encourage the much-needed investments in the sector,” he added.