The sops for biotech sector announced by the Central Government during the interim budget of July 2004 does not cover biotech R&D exports worthy of excise concessions. The absence of specific guidelines acknowledging biotech R&D as an integral part of biotech industrial activity is the reason for this anomaly. The research institutions situated outside the biotech parks of the country has sought centre's intervention in this regard and want the forthcoming budget to rectify the defect so as to make them eligible for excise exemptions.

What the biotech contract research organisations situated in various R&D parks (not biotech parks) want is the recognition of technical services like R &D in biotech sector to be declared eligible for excise benefits. Though the Union Budget 2004-'05 had given more attention to biotechnology than pharma by providing 100 per cent tax exemption on research in biotechnology, the research companies outside specific biotech parks were not eligible for the concession. "We want to export our R&D services. We are willing to declare our foreign exchange surplus like any other EOU. We need to be offered the same benefits that are given to other biotech research units inside biotech parks," the biotech entrepreneurs said.

Under the Foreign Trade Policy 2004-'09, all benefits enjoyed by Export Oriented Units (EOU) were passed on to Biotech Parks (BTP) in the country also. "The application of biotechnology would pay rich dividends in terms of new products and technologies. To harness this frontier of science, we propose to establish Biotechnology Parks in the country which would get all the facilities of 100 per cent Export Oriented Unit (EOU)," the government stated.

Under the policy, 100 per cent FDI has been permitted for BTPs through Automatic Route similar to SEZ units. BTP units are exempted from payment of Income Tax as per the provisions of Section 10A & 10B of the IT Act. The policy states that export proceeds will be realised within 12 months and BTPs will be allowed to retain 100 per cent of its export earning in the EEFC account. The units are not required to furnish bank guarantee at the time of import or going for job work in DTA, where the unit has: 1) a turnover of Rs one crore and above, 2) the unit is in existence for at least three years and 3) unit having an unblemished track record.

The 100 per cent FDI through automatic route was expected to encourage MNC biotech companies to shift their R&D base or outsource their R&D requirements from a low-cost destination. By restricting this advantage to the biotech parks, the government has deprived the R&D units that are in existence outside these parks. The industrialists want all knowledge-based services exports (both IT and BT) to be considered at par and offered same excise concessions. They also want the government to realise that R&D is integral part of any biotech industrial activity.