In the run up to the Union budget, the small scale pharma manufacturers outside the excise free zones have become active again demanding an end to the tax holiday schemes in the country which, they claim, will result in reduction of prices of medicines and also more revenues for the government.
Demanding to start levying excise duty in these zones at least on contract manufacturing, so that lakhs of traders who are sourcing medicines at high MRP are checked, the SME Pharma Industries Confederation (SPIC) in a letter shot off to the prime minister's Office, said "There is no case whatsoever for extension of tax holiday as both the Planning Commission as well as the PMEAC has passed severe strictures against it. Vested interests should not be allowed to prevail over national interests."
Stating that the government has lost a whopping Rs 10,000 crore during the last five years due to the migration of pharma companies to excise free zones and consumers suffered a price rise of up to 326 percent, SPIC said that though the government had reduced excise duty on medicines from 16 to four per cent in 2008 to provide a level-playing field, it was circumvented by the units in tax holiday states by increasing MRP on labels. "If we print similar high MRP on labels, we are subject to excise, which makes us unviable. Needless to say, unlike cars, higher priced medicines sell more as they have margins for doctors and traders," it said.
The clamour of the SSIs outside the excise free zones comes amidst speculation that the union government is actively considering to extend the tax holiday schemes by another three years in the forthcoming Union budget. The Union government in 2002 had announced a tax holiday for the industries who establish their units in the industrially backward hilly states of Himachal Pradesh, Uttarakhand, J&K, etc and subsequently hundreds of pharma units had migrated to these states to exploit the tax holiday regime.
Ever since, the small scale pharma manufacturers outside the excise free zones in the country have been clamouring for a level-playing field as they have lost a substantial amount of business to their counterparts in excise free zones due to the absence of deterrent like excise duty there.
The SPIC demanded to the government to increase the abatement rate from the existing 35 per cent to 60 per cent to remove anomalies of MRP-based excise and also to raise the SSI exemption limit from the presently Rs 1.5 crore to Rs 5 crore as pharma cannot be bracketed with other industry which is neither regulated nor under price control.