A few drug units in Export Processing Zones and some export oriented units outside EPZs in other parts of the country are regularly diverting some key bulk drugs imported duty free into the open market by misusing the provisions in the EXIM policy, it is learnt.

Some of these drugs like rifampicin, penicillin G, vitamin C, metronidazole, caffeine etc are being imported from China, just compacted, repacked and sold as bulk drugs produced by them in the open market. No chemical manufacturing process is taking place on these bulk drugs before they are pushed into the open market.

Rifampicin and penicillin G are also being freely sold in the market although they are in the negative list for sometime. In the case of other bulk drugs, anti dumping duties have been imposed by the government several months ago.

As per the provisions of the EXIM policy, EOUs and units located in EPZs can import bulk drugs duty free for export production. They are also allowed to sell 50 per cent of their production in the domestic tariff area under the provisions of the EXIM policy after a manufacturing process.

Informed sources pointed out that by misusing the provision of 50 per cent domestic sales allowed for EOUs and units in free trade zones, these units are actually evading payment legitimate customs duty to the government besides hurting the domestic units manufacturing these life saving drugs.

In terms of the guidelines under the Exim Policy for sale of goods in the Domestic Tariff Area by the EOU/EPZ units, the sale of goods in DTA is subject to the payment of applicable duties as notified from time to time by the Department of Revenue, Ministry of Finance, Govt of India. Obviously, the objective of these guidelines is to provide a level playing field to the domestic industry.

It is learnt that while clearing the manufactured products in DTA, no anti dumping duty is paid by the units and also no demand by the Excise Authorities is made. It seems in various notifications emanating from the above guidelines, since there is no specific mention of anti-dumping duty and only customs duty is mentioned, EOU/EPZ units are exploiting this loophole.

A joint petition signed by Indian Drug Manufacturers Association (IDMA), Bulk Drug Manufacturers Association (BDMA) and Organisation of Pharmaceutical Producers of India (OPPI), has however asked the Central authorities to intervene and stop such practices.

In the case of rifampicin, local manufacturers had made specific complaints to The Chairman of Central Board of Excise & Customs and the Development Commissioner of Kandla Free Trade Zone against Lacure Pharmaceuticals Ltd last year stating that this company has been importing rifampicin and selling it in the local market after compacting and repacking.

They had pointed out that the importing company is not conforming to the definition of manufacturing for purpose of chapter 9 of the EXIM policy and this activity can only be classified under packing, labeling, reconditioning, repair and re engineering. Therefore, Lacure is doing is just a trading activity in case of rifampicin. Rifampicin is the most advanced anti TB drug marketed in the country by several companies.