For some years, the Union budget has been a disappointment to the pharmaceutical industry and this year is no different. Most of the major demands made to the Centre have been ignored by the finance minister and the industry associations continue to grumble. A key demand, the industry has been pressing for some years now, was to bring down the excise duty to 8 per cent from the current level of 16 per cent. This was not considered at all. Associations representing large, medium and small scale sectors have been raising this somewhat legitimate grievance in the wake of flight of a large number of pharmaceutical units to duty free states Himachal, Uttaranchal and Jammu & Kashmir. With no excise duty on medicines in these states, pharmaceutical units operating in other parts of the country have a serious disadvantage in terms of costs of production. This anomaly in excise duty since 2003 has been hitting pharmaceutical units situated especially in regions around the duty free states. The policy of excise freedom in hill states has turned this region into a haven for manipulation of rules by several units. There are reports of semi finished and finished pharmaceutical products coming into these states and are being taken out without any manufacturing process just to claim the excise benefit. No monitoring of such circumvention is being done by the excise authorities. In short, this distorted policy is only creating a few islands of privilege in the country where the beneficiary is neither the state nor the consumer but the unscrupulous entrepreneurs at the cost of national exchequer. The finance minister could have corrected this situation this time by cutting down the excise duty. Another demand that has been bypassed was about the raising of the abatement rate. Pharmaceutical units have been expecting an enhancement rate to 50 per cent from the current 42 per cent. With substantial rise in excise collection over the years, the finance minister could have given this just incentive at least to the SSIs. What has been given to the SSIs in the Budget is the raising of excise exemption limit to Rs 1.5 crore from Rs 1 crore. The sector has been expecting a limit of Rs 3 crore. The cut in customs duty on a large number of chemicals and other raw materials used in pharmaceutical industry to 5 per cent from 12.5 per cent should, however, provide a big relief to the units. In fact this should also result in reduction in the prices of several medicines. That is something to be seen. The R&D segment of the pharmaceutical sector has been given a major incentive in the budget. Withdrawal of 12.24 per cent service tax on clinical research could attract many more such businesses into India. As it is, India has emerged as a favoured destination for clinical trials because of cost advantages. This Budget concession should give the sector a further boost. The hospital sector has also received due attention from the finance minister. The reduction in import duty on medical equipments by 5 per cent will be of great benefit to major players in the hospital sector. Healthcare being a capital intensive sector, equipments form a significant portion of their overall costs. The concession will also enable hospitals to go in for replacements and technology upgradation in a big way.