The Himachal Drug Manufacturers Association's (HDMA) recent letter to the Prime Minister stating that there are only a few small-scale units outside the excise exempt zone in the country has come in for sharp criticism from the small-scale drug manufacturers associations in the country. Enraged over the belittling effort of the HDMA, the Punjab Drug Manufacturers Association (PDMA) has shot off another letter to the PM recently explaining the ground realities.
The HDMA had recently written to the Prime Minister urging him to desist from any move to withdraw excise exemption to contract manufacturers in the tax exempt zones like Baddi in Himachal Pradesh where thousands of crore of rupees investments have been made the country's leading units of the pharma industry.
The HDMA letter goes, "Still 200-300 units may be left over who have not established their units in tax free zone but yet they have three years time to do so. In fact, these miniscule people are the one who are making all the noise against the tax free zone industry although they are not barred to establish their units there. But they have not taken such decision for the reasons best known to them. In a nutshell, whatever effect was to take place on the Pharma industry in the country due to establishment of tax free zone, has been inflicted upon and the people have taken remedial recourse by establishing units in tax free zones and any reverse action can not be taken now for a miniscule of remaining people."
Describing that disinformation is being spread by vested interests in a bid to delay the implementation of EAC recommendations, the PDMA letter dated July 14, 2007 clarified, "First of all there are well over 5000 SSI units in non tax exempt states with investment of Rs.10,000 crore who are in dire straits owing to magnified disparity caused by levy of MRP based excise. Out of these, 1500 are in Gujarat alone and others spread out in Maharashtra, TN, AP, WB, Rajasthan, Haryana and Punjab."
Asking the Prime Minister to intervene in the matter the PDMA letter said that around 500 SSI units who migrated to tax holiday states to make quick money from the anomalous situation created by MRP based excise, contend that they are fully WHO compliant. This enables them to tap the export market easily. But they simultaneously threaten that Rs 1500 crore of bank loan will get stuck up if the government levies excise on contract manufacturing as per EAC recommendations, which have been made in wake of revenue loss caused by migration and to provide a somewhat level playing field.
The letter further says, "Clearly migrating units are oblivious of the fact that tax holiday was designed only for new industry. It is indeed shocking that we should be accused for not migrating. And if they lacked the character to fight injustice 60 years after attaining freedom and instead choose a legal route to evasion to enjoy the magnified tax disparity at our cost, they are themselves to blame. Anomalies cannot continue forever."
MRP based excise has not only failed to achieve the twin objectives of higher revenue and price control but has proved to be counterproductive. The common man suffers from high prices of medicines owing to lack of fiscal deterrent on MRP which is encouraging profiteering in tax holiday states, something confirmed by NIPER and EAC. It is serious because exempt states now produce 50 per cent of total medicines. Employment to 10 lakh workers in SSI in non tax exempt states hangs in the balance as production declines. Instead of any gain, revenue has dipped Rs 300 crore owing to migration. We request that EAC recommendations designed to remove the anomalies of MRP based excise may be implemented in the national interest, the letter added.