The New Exim Policy has successfully sealed the loophole in the earlier policy by which many exporters have been diverting certain key bulk drugs, imported duty free for export production, into the open market without undertaking any manufacturing activity.

Exporters located mainly in Kandla Free Trade Zone and other parts of Gujarat have been indulging in this activity of importing of bulk drugs like rifampicin, metronidazole, Caffeine, penicillin G, vitamin C, etc, just compact or repack them and sell as finished products in the open market. In the process, government has been losing huge amounts of customs duty.

As per the provisions of the Exim Policy 2002-03, EOUs and units located in EPZs can import bulk drugs duty free for export production and sell 50 per cent of their production in the domestic tariff area only as finished products.

Informed sources here said that by misusing this EXIM policy provision, these exporting units have also been freely selling negative and restricted list items like penicillin G, rifampicin, Vitamin C etc. Such sales in DTA have been hitting domestic bulk drugs units badly.

The commerce ministry's decision to incorporate this change in the policy comes in the wake of representations made by the IDMA, OPPI, BDMA and affected companies in this regard.

Presently, EOUs and units located in EPZs can import bulk drugs duty free for export production and also allowed to sell 50 per cent of their production in the domestic tariff area after a manufacturing process. However, by misusing this provision, 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.

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