The small scale pharma industry in the country has squarely blamed the 'distorted fiscal policies' of the previous central governments which led to a great mess in pharma sector being witnessed in the country with the prices of medicines have gone manifold while the quality of medicines has come down.

The small scale industry representatives will soon be meeting the new ministers concerning the industry including health minister Gulam Nabi Azad, chemicals minister MK Azhagiri, finance minister Pranab Mukherjee and others to drive home this point and also to urge them to take some remedial measures to reverse the trend to keep the prices of medicines under check.

Leaders from small scale industry said that the tax holiday scheme showered as populism on Himachal Pradesh and Uttarakhand by the earlier government in 2003 provided an advantage of 10 per cent to pharma industry setting shop in excise free zones (EFZ). Excise was payable on ex-factory clearance value at that time. In January 2005, the modality was changed and excise was levied on MRP of medicines. This magnified the advantage of EFZ to over 30 per cent despite the fact that rate of excise was not changed as it remained 16 per cent.

The noble objective behind the change was to increase revenue and to discourage companies from printing higher MRP on labels of medicines by subjecting it to a succeeding taxation. But, the migration of industry defeated both the objectives. In spite of recommendations from Dr Pronab Sen Committee and Economic Advisory Council to reverse the decisions, the finance ministry did no pay heed to it and this obstinate stand proved disastrous and resulted in what we have today a pharma mess, they said.

When more than 70 per cent of the country's pharma production migrated to EFZ, revenue decreased instead of increasing. The worst pitfall of the policy was 326 per cent price rise when medicines were produced in EFZ as there was deterrent like MRP-based excise in the excise free zones, something pointed out to the government by NIPER, the small scale industry leaders said.