Despite the Prime Minister's decision to restrict the excise duty exemption in excise-free zones only to manufacturers having their own licenses a few months ago, implementation of this decision is being held up as the relevant files have not moved down, it is learnt.
Acting on the Economic Advisory Committee (EAC) report, Prime Minister Dr Manmohan Singh had in 2006 directed Finance Minister P Chidambaram to implement the EAC recommendations. The EAC, headed by noted economist Dr C Rangarajan, had made the recommendation among other things that the 'area-based exemptions should be restricted to manufacturers who manufacture under their own license and not those who undertake contract manufacturing'.
Expressing his willingness, the Finance Minister in his reply to the PM on December 21, 2006 wrote, "The EAC has recommended that the area-based exemptions should be restricted to manufacturers who manufacture under their own license and not those who undertake contract manufacturing. If PM has approved this recommendation, it would have to be immediately applied in Uttaranchal and Himachal Pradesh and the notification granting areas-based exemption in these two states would have to be modified".
After almost six moths of this letter, the issue remains only on paper, thanks to some powerful forces playing the spoilsport. The small pharma manufacturers in the country, who were hopeful of some level-playing field, are apprehensive of some powerful hands working from behind the curtain.
According to sources, apart from the big pharma industries, several powerful politicians including Union Minister of State for Finance Pawan Bansal who have units in the exempt zones are working against the implementation of the EAC recommendations. Sources said, Bansal's son Amit runs a big pharma unit at Baddi in Himachal Pradesh.
After the FM agreed to withdraw excise exemption to contract manufactures in his letter of 21 Dec 2006, a meeting was held in the Prime Minister's Office in January 2007. It is recorded in the minutes that revenue secretary has agreed to implement the clause after Uttarakhand elections. Three months have gone by since then and excise duty on contract manufacturers has not been withdrawn obviously because many powerful people are out to make hay while the sun shines in exempt states, even if it means a huge loss to the national exchequer, sources said.