The Federation of Medical and Sales Representatives' Associations of India (FMRAI) has asked the union finance ministry to abolish excise duty on all medicines in the national list of essential medicines prepared by the ministry of health and family welfare and to reduce excise duty on other medicines to 4 per cent.

In a pre-budget submission to the finance ministry, the national association of medical representatives said that the excise duty reduction on the medicines will go a long way in lowering the prices of medicines, especially the essential medicines. The Association asked the government to abolish excise duty on all medicines in the national list of essential medicines prepared by the health ministry and to reduce excise duty on other medicines from the existing 16 per cent to just 4 per cent. Interestingly, the industry's demand to the government is to reduce the excise duty to 8 per cent.

Excise duty on pharmaceuticals earlier was lowest. When duty structure was differential (24 per cent, 16 per cent and 8 per cent), lowest excise duty of 8 per cent was applicable on medicines. Thereafter, when excise duty was made 16 per cent as a singular rate, duty on medicines was thus doubled.

Further onslaught on medicines came in January, 2005. Earlier excise duty was charged on the ex-factory cost. From January, 2005 excise duty was imposed on retail price less some abatement amount. Impact on retail price can be sited as follows. For price controlled medicines, people are paying at least 25 per cent more on excise duty and for other medicines the amount is at least 87 per cent or more.

Excise duty is collected from the end users not from the producers or sellers. Patients are now made to pay excise duty on profits (mark up) of the producers.

This issue has become further complicated due to creation of excise duty free states. Many producers have shifted their production units to these states or are outsourcing production in the SSI units set up in this states. The estimated number of such production units is 300. This shows that the Government is loosing a huge amount of excise duty because of such decision, the FMRAI said.