The Union ministry has exempted all 126 life-saving medicines currently under the zero customs duty regime from payment of excise duty. The medicines, which would be excused from the excise duty by the finance and company affairs ministry, are blood group sera, anti-haemophilic factor concentrate, intravenous amino acids, foetal bovine serum, ELISA kits, X-ray diagnostic agents, christmas factor concentrate and immunoglobulins such as those used against hepatitis B, diphtheria, rabies, pseudomonas. The other exempt medicines include radioimmunoassay kits for hormones, normal human plasma and immunoglobulin, calcium folinate, cobalt-60, epirubicin, floxuridine, flucytosin, idarubicine.

These drugs, imported in finished form currently attract 16% excise duty as is levied on all domestically-manufactured drugs, owing to mandatory labelling and re-labelling requirements in the domestic market. In a controversial stance, the revenue department had reckoned labelling as manufacturing activity liable for payment of duty.

The basis of zero-import duty on lifesaving products is that there is either scarce or no domestic production of these drugs and the medicines have to be made available to patients at affordable prices. Levy of excise duty had scuttled the objective, with the companies that imported and sold these products being forced to carry the burden to the patients.

Rule 96 of the Drugs & Cosmetics Act mandates that packs of drugs, vaccines and diagnostic products sold in the country would contain labels giving information about side effects, dosage schedules, and warnings against improper or unauthorised use. Besides, it is compulsory under the Drugs Price Control Order that the MRP (inclusive of excise duty and exclusive of local taxes) shall be printed on the packs.

Presently there are different customs duty rates applicable to imported lifesaving products. While the 126 drugs on List-4 of the customs notification no 21/2002 attract zero duty, customs duty @ 5 per cent has been imposed on specified 88 drugs in Budget 2002-03.

Seven drugs including those for cancer and kidney ailments such as erythropoeitin, doxydybicin, cyclosporine, nilutamide were put under 15 per cent customs duty in 2000. Seventeen other drugs had been under a 25 per cent duty since 1998. The apparent reason for withdrawal of the exemption of the 88 drugs in the last budget seemed to be reports of creation of domestic manufacturing capacities. As per the drug policy, the government has a mandate to encourage domestic production of drugs. Ever since the exemption was revoked by the revenue department for the 88 drugs, the ministry of health and the ministry of chemicals and fertilisers have told the department that in the case of most of these drugs the domestic capacities were either non-existent or inadequate and so the exemptions had to be brought back.