A major contributor in the drug manufacturing sector in India, the pharmaceutical industry in Maharashtra grew steadily to a peak in 1980s before starting to register a downfall in the past few years. The industry has recorded a decrease in the number of manufacturing units in the state, from a total head count of 2436 drug manufacturing units in 1996-97 to 622 licensed manufacturing units at the beginning of the current financial year.
The industry in the state, which currently contributes 20 per cent of the total pharmaceutical production in the country, is the same one that once contributed almost 80 per cent of the total national production. Drug sales through trade route is only 15 per cent while the rest of the 5 per cent is from supply to both public and private hospitals. The drug manufacturers are currently looking up for help from both the state and the central government through policy reforms mainly in finance sector.
The industry players attribute a number of issues for such a diminution in the sector. The shifting of manufacturing units from the state to the tax exempted states like Himachal Pradesh, Uttaranchal, Chattisgarh, Jammu & Kashmir and Sikkim is one of the major reasons for the business deluge faced by the industry, points out the office bearers of Indian Drug Manufacturers Association (IDMA).
"The exemption of various taxes including the excise duty and income tax in these states affects the business of manufacturers in Maharashtra and Gujarat. Our demand to reduce the excise duty on Maximum Retail Price is pending for a long term. Such an action is necessary in our current situation for the survival of pharmaceutical industry in the state," said B N Singh, president, IDMA.
The overall cost of running a pharmaceutical unit in the tax haven states is much less than running a unit in Mumbai, due to wage level offered for the employees in these two states, real estate prices and other expenses for operation. The increased tax structure and infrastructural expenses in the state adds insult to the injury.
The IDMA's stress is more on decreasing the excise duty on MRP from 16 per cent to 8 per cent rather than holding the companies back to stay in the state for suffering the tax burden. "The reduction of excise duty rate is the major issue we were pursuing. We will not stop unless the demand is agreed," added Singh.
In addition to the taxations including the excise duty, the state government continues to levy Octroi tax on the industry in the state, which is an extra burden to the industry in Maharashtra. "While some of the neighbouring states which earlier levied Octroi has stepped down from further implementation due to various reasons including the interest of the industry. In Maharashtra, the government is still levying 4 per cent Octroi in addition to the excise duty, and this is an issue to be tackled as soon as possible," said S R Vaidya, Co-Chairman, SME committee, IDMA.
The norm mandating MRP inclusive of all taxes including sales tax or VAT has necessitated amendment in the Maharashtra Value Added Tax Act, 2002 and the government has came up with a resolution recently. The amendment, which would reduce the price of medicine, is yet to be implemented through a Government Order. The industry with its well-known role in the life saving healthcare sector is waiting for the decision to be implemented for public health, according to sources.
Increased presence of labour problems is another issue faced by the pharmaceutical firms, says the industry sources. For the last one year, the association is demanding revision of Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act (MRTU & PULP Act) 1999, which brings medical representatives under employees (workmen).
Strict implementation of revised Schedule M by the Maharashtra Food and Drug Administration (FDA) has resulted in closing down of 165 companies as on April 2007. Though the implementation of revised norms has helped the small companies to compete with the bigger players, this has resulted in decrease in the number of manufacturers to 622 in the state.
However, despite all the challenges, the association hopes that the industry can grow up the support of the state and central governments. IDMA is planning to support from the Maharashtra state government to get the demand approved from the central government. "If the state government support the industry, I am sure that it will be a turnaround for the industry in Maharashtra.