There was mixed reaction from pharmaceutical industries to the Union budget presented in Parliament yesterday by Finance Minister P Chidambaram. While some companies welcomed the budget, others termed it as uninspiring.
Welcoming the budget, Ranbaxy executive director Ramesh Adige said, "It is extremely heartening to note that the R&D incentive has been extended by 5 years. This will help research-based companies to continue their work in a stable environment. Focus on health, in areas like HIV/AIDS and polio and in education is commendable and is in line with the objective of achieving inclusive growth."
Echoing the same view, Dr Swati A Piramal, director-strategic alliances and communications, Nicholas Piramal said, "Unlike the earlier union budgets, this budget has a positive approach to the bio pharma and clinical trial sector. The budget also has a positive approach towards clinical trials, as it recommends for service tax reduction and increase in budget allocation. I think it is for the first time the finance minister gave such a space for the bio pharma R&D and clinical trials in a union budget. Especially, the extension of the weighted average deduction of 150 per cent, under Section 35(2AB), will be supportive for pharmaceutical companies which are into R&D".
Lauding the budget, Biocon chairman and managing director Dr Kiran Mazumdar-Shaw said, "The biotech sector has got a bunch of incentives. However, when it comes to divided tax and introducing a fringe benefit tax on ESOPs it is just not a good move at all. A lot of our demands presented through ABLE have been addressed. The exemption of the weightage average tax is good as this was a sort of a single point agenda for companies like Biocon".
Reacting on the same lines, Glenmark Pharmaceuticals CEO and MD Glenn Saldanha said, "Given that the pharma industry is one of the growth sectors for the Indian economy and that India is now respecting IPR which would create challenges for Indian companies in the future, we were hoping there would be significant incentives to stimulate Indian R&D. However while we expected more, we are glad that the R&D 150 per cent tax incentive will continue for an additional five years."
Reacting sharply to the budget, Dr Reddy's Laboratories Managing Director Satish Reddy said, "From a pharmaceutical industry perspective, the budget has again turned out to largely be a non-event. There is no doubt that the extension of the weighted average deduction of R&D expenditure, which is welcome, a marginal reduction in the customs duty of specified machinery and the exemption from service tax on certain clinical research are positives. But there is nothing in terms of bold moves that will change the trajectory of growth of the industry or decisively impact public health".
Terming the budget as not up to the mark, Novartis India vice chairman and managing director Ranjit Shahani said, "while the pharmaceutical industry completely missed the FM's radar last year, we were hoping to be compensated by a 'dream' pharmaceutical budget this year but alas that was not to be. The major need for bringing down transaction cost of the pharmaceutical products by reducing excise duty from 16 to 8 per cent has once again been given the go-by. The tax exemption for R&D for five years up to 2012 should have been given up to 2017". However, he commended some of the provisions for the health sector in the budget.
Orchid Chemicals and Pharmaceuticals managing director K Raghavendra Rao said, "Overall, while the market may have expected more, I believe that this is a Budget with a vision focusing on priority areas. For the pharma industry in particular, the exemption of clinical trials from the service tax, concessional rate of 5 per cent customs duty for R&D institutions registered with the Directorate of Scientific and Industrial Research and reduction in customs duty for specified machinery for the pharmaceutical and biotech sectors are welcome steps".
Shasun Chemicals and Drugs whole time director Vimal Kumar said, "The extension of the weighted average deduction of 150 per cent, under section 35(2AB), for another 5 years will be a great boost to the R&D. Further, the move to exempt service tax on clinical trials and cut in duty for pharma research equipments will be beneficial to the overall safety and efficacy trails in the industry. However, increase of dividend distribution tax to 16.995 per cent is detrimental to the corporate world."
J B Chemical & Pharmaceutical director D B Mody said, "Pharma Industry were expecting the reduction in the excise duty so that it can be passed on to the consumer. The Finance Minister has accepted the suggestion of the Industry about the 150 per cent weighted average deduction for Research and Development". This benefit is extended to Contract Research projects also. Exemption of clinical trials of new drugs from service tax.
Lupin Ltd MD Dr Kamal Sharma said, "The extension of R&D sops is welcome and will provide impetus to the pharma industry in particular to carry on the intensive R&D efforts. However, it would have helped to extend the scope of such sops to other allied and incidental activities pertaining to R&D, which strengthen intellectual property".
Indoco Remedies chairman and managing director Suresh G Kare said, "There is nothing in this year's budget that will push growth rates of pharma companies. On the contrary the increase in Dividend Tax from 12.5 per cent to 15 per cent and the additional cess of 1 per cent, will impact the profitability of the industry. The expected reduction in excise duty on pharmaceuticals from 16 per cent to 8 per cent did not come through".
Reacting to the budget, Alkem Laboratories chairman Samprada Singh said,
"Overall we believe that the budget is aimed at stability and continuity. One would have been happier if certain corporate expectations had been realized. Increase in corporate dividend tax comes much unexpected and the repercussions may not be welcome. Reduction in import duty on specified machinery, exemption on ED on life saving vaccines, extension of weighted deduction on scientific research for a further period of five years etc are welcome".
USV MD Prashant Tewari said, "The budget has brought out some positives for the Pharma business - primarily in the areas of API manufacture and Research and Development. The reduction of peak customs duty rates will help the API businesses, which is clearly a desired area of strength for all pharma companies. Also, companies engaged in some specific therapeutic areas will benefit due to the fiscal allocation set out in the budget".