A hike in the abatement rate to the pharmaceutical sector appears to be on the cards once again with the Union Finance Ministry, in a curious u-turn to its earlier stand, has set the ball rolling for increasing the abatement only to pharma SSIs in the country.

According to sources, the department of revenue in a letter dated March 5 has asked the Union Chemicals and Fertilizers Ministry to collect all the available data in support of its demand for increase in abatement to the SSI companies in pharma sector in the country.

The revenue department's communication is significant because the Finance Minister P Chidambaram had earlier turned down the demand of pharma SSIs for raising abatement on the plea that there is not sufficient data to buttress its demand. The department of revenue in its March 5 letter has circulated a 14-point questionnaire format to the Chemicals department in this connection.

Industry sources said, that Union Finance Minster P Chidambaram, who had earlier rejected the pharma SSI units' demand, had taken a u-turn in his stance due to immense pressure from none other than Prime Minister Dr Manmohan Singh. In fact, Prime Minister has also been under tremendous pressure on this ticklish issue as Chief Ministers of ten states and a large number of Members of Parliament had also represented to him in this regard.

The first salvo in this regard was fired by Union Chemicals and Fertilizers Minister Ramvilas Paswan who voiced his support as early as November 2005.

Increase in the abatement has been a long-pending demand of the pharma SSIs who have literally been waging a battle of existence in the face of schedule-M compliance and tax sops announced by some states. As the demand reached its crescendo, a committee headed by noted economist Dr Rangarajan was appointed some time back to look into the issue along with others. The Rangarajan committee submitted its report on November 21 last year to the Prime Minister who in turn sent the report to the Finance Minister for implementation. The report recommended raising the abatement from 42 to 60 per cent.

But, the Finance Minister wrote a letter to Prime Minister Dr Manmohan Singh expressing his dissatisfaction over the recommendation. In his letter dated December 21, 2006, Chidambaram had said that he cannot increase the abatement to the SSIs in pharma sector as that will amount to discrimination against the other 103 commodities, which have also been covered under this MRP-based abatement.

Now, the Department of Chemicals after collecting all the data regarding the SSIs as required by the revenue department will submit its findings to the Tax Research Unit (TRU) of the revenue department. The TRU after a detailed study will submit it's finding to the 5-member Abatement Committee headed by PC Jha for final notification. All these process might take 2-3 months, sources said.