Even as the migration of large and medium scale pharmaceutical companies to Himachal Pradesh and Uttarakhand continues unabated due to the tax sops announced by the government way back in 2002, the central government stands to lose a whopping amount Rs 1000 crore during the current financial year by way of central excise alone.

According to the data available with the directorate of data management, central excise and customs, there was a steep fall in the revenue collection from the pharmaceutical products falling under chapter 30 during the last fiscal compared to the previous year. While the total revenue collection by the central excise department from the pharma products during the year 2005-06 was Rs 2265.12 crore, the department could collect only Rs 1455.37 crore till December 2006 on this count.

According to industry experts, the collection this year is going to be further dipped as a lot of companies which have shifted their base to Baddi in Himachal Pradesh and other places in Uttarakhand will start production by the middle of this year. "By any estimate, the government is going to lose around Rs 1000 crore this year on central excise alone as several units who have shifted their base to Baddi will start production this year", Punjab Drug Manufacturers Association president Jagdeep Singh said.

Though the government had announced 10-year tax holiday for industries in Himachal Pradesh and Uttarakhand in the year 2002, there were not many takers in the initial years as the margin was not that much attractive to make huge investments that entails the shifting of base of the industries to remote areas of these states. But, the real scramble to Baddi started when the government introduced MRP-based excise on pharma products in January 2005, making the investments in these areas highly profitable.

The data points that the government was successful in its intention of increasing the revenue by introducing the MRP-based excise duty in the first year as the revenue shot up from Rs 1616.40 crore in 2004-05 to Rs 2265.12 crore in 2005-06, an increase of 40 per cent.

But, in order to avoid the government dragnet, the big and medium players took the easy route and shifted their base to tax holiday destinations, leaving the small players to feel the pinch of MRP-based excise.