Small scale pharma sector is getting frustrated as Union finance ministry is coming with objections to delay the much-awaited withdrawal of tax exemption to contract manufacturers in the tax-exempt zones and enhancement of the abatement rate for the SSIs.

After stalling the move for months, now the Finance Ministry has written to the Chemical Ministry seeking a definition for `contract manufacturing' in an obvious attempt to further delay the process. Revenue department on its part has launched steps to collect the data of the small scale sector to ascertain the adverse impact faced by them.

Snubbing the efforts of the small scale players to win the promised assistance in line with the recommendation of the Economic Advisory Committee and the direction of the Prime Minister himself, the Finance Ministry has shot off a long letter asking the Chemicals Ministry to explain the description of `contract manufacturing', sources said.

The Centre was planning to restrict excise duty exemption only to companies who manufacture under their own licences in excise free zones, even as big players under the IDMA banner was among those who were out to stall the process through intense lobbying.

``By a conspiracy of large industry lobby supported by some in the government, SSI units were first asked to implement GMP at a huge cost by breaking down and modifying their units as per GMP) norms, when there was no logic in implementing it. Because it was not based on quality of drugs in the country available in terms percentage of samples of drugs which failed the tests,'' said a leader from the SSI sector.

"This is part of the attempts by the large industry to choke the small scale sector and grab its 40 per cent market share. So after the GMP implementation, MRP based excise was another measure used by the Finance Ministry to make SSIs unviable. Chemicals Ministry, on record, has clearly exposed how ineffective was the MRP-based excise policy," he said.

On increasing the abatement rate from present 40 per cent to 60 per cent for small scale pharma industries as recommended by the EAC also, the Finance Ministry remained non-committal, it is learnt. Finance Minister P Chidambaram has recently expressed his `difficulty in providing a separate rate of abatement for SSI as one of the 103 other commodities covered under the MRP-based excise have two rate of abatement.''