The small scale pharmaceutical manufacturers through the banner of CIPI, has asked the government to limit the proposed higher abatement rate while calculating the MRP based excise duty for drugs, to only to SSIs.

The Economic Advisory Council (EAC), under the chairmanship of Dr Rangarajan, has recommended 60 per cent abatement for SSIs and suggested denial of excise exemption on MRP for contract manufacturing companies in centralised excise free zones. Though the recommendations were accepted by the Prime Minister and has been forwarded to the finance ministry, the suggestion of two rates of abatement was objected by the ministry, which resulted in a stalemate over the issue.

CIPI sources alleges that there is a virtual stand off between the Prime Minister's office and the finance ministry in the case, as the finance ministry objected to approve the recommendation stating that two rates of abatement is not prevalent in the 103 other items under MRP based excise duty. The 60 per cent abatement was fixed only after all parties agreed to it, including the revenue secretary, they added.

While the recommendation on denial of excise exemption for the contract manufacturers in tax haven areas was accepted by finance ministry, it refused to consider increase of abatement exclusively to SSIs on the grounds that abatement is not a discretionary and the matter has to be cleared by the abatement committee. The finance ministry has refused to issue two rates of abatement in the sector, as it is not prevalent in 103 other items under MRP based Excise, it is learnt.

However, a meeting of EAC, the revenue secretary and the secretary of Chemicals and Petrochemicals (C&PC) is being convened on January 24, 2007 under T K A Nair, principal secretary to PM to meet consensus in the issue, informed sources told Pharmabiz. The confederation is in constant touch with the PMO and the finance ministry to clarify the need of two rates of abatement for one commodity, by displaying the mode of calculation to the finance ministry.

"CIPI has made it clear to all concerned that Pharma is the only regulated industry in the country. If Dr Pronab Sen recommendations are rejected, then how else is SSI going to be provided relief? The PMO, EAC and C&PC are with CIPI on the issue," T S Jaishankar, chairman, CIPI told Pharmabiz.

The confederation demands separate abatement rate for the SSIs, other than the rate offered to large-scale companies. It explains that the uniform rate of abatement for both the large and small pharma companies may affect the small players, as they have to keep the franchisees with a major share of the revenue, while the pharma majors with their dedicated marketing team could find the hike of abatement from 35 per cent to 40 per cent is satisfactory.

As Pharmabiz reported earlier, the EAC and Chemicals Ministry has recommended to hike the abatement from the current 40 to 45 per cent for all drugs, and as a special case, from 40 to 80 per cent for the small scale pharma units, while the finance ministry had an idea for a general hike in abatement which could be as high as 60 per cent for the entire industry. It is in this background, the Confederation moots a major campaign for a higher abatement exclusively for SSIs.