Owing to the widespread protest from the various sectors of the drug industry, the union finance ministry may modify the MRP based excise norms in the Union budget, by increasing the excise abatement from the present 35 per cent to 40 per cent and by reducing the excise duty from 16 per cent to 8 per cent for drugs, it is learnt.

Sources told Pharmabiz that the move stems from the union ministry of chemicals & fertilizers, following the protest of the industry, mainly the SSI units. Endorsing a recommendation to this effect from the secretary, the union ministry of chemicals & fertilizers, the chairman, the central board of customs & central excise has recommended to the Budget Committee of the finance ministry to consider this proposal.

Sources said though they were sure about the increase in abatement which is definite to come (as reported by Pharmabiz earlier), they were not sure whether the finance ministry would accept the recommendation to reduce the excise duty by half, as the exchequer would be benefited by several crores of rupees additional revenue by the present notification to levy excise duty based on MRP. The officials are also in favour to continue the MRP based excise as a measure not to allow the large companies taking advantage of the benefit offered to the SSI units, and thereby avoiding to pay the excise duty due to the government.

These suggestions were discussed at a meeting recently held between the Confederation of Indian Pharmaceutical Industries (CIPI-ssi) office bearers and the officials of the Central Board of Customs & Central Excise. According to the CIPI chairman T S Jaishankar, the chairman, central board of customs & central excise had then demanded the CIPI office bearers to give a letter in writing to the government elaborating their willingness to accept a change in the notification, increasing the excise abatement from the present 35 per cent to 40 per cent and to reduce the excise duty from 16 per cent to 8 per cent for drugs. However, CIPI refused to sign the document as their demand was full rollback of the excise duty regime, said Jaishankar.

The SSIs complain that the excise duty burden on the small scale pharmaceutical units could go up by 42.44 per cent as a result of the MRP based excise duty structure, an increase by 260 per cent from the earlier excise duty structure, and the burden on large scale manufacturers could remain unchanged. The SSIs will have to pay an additional excise burden of Rs 6.53 on a Rs 100 MRP product, whereas the larger units need not shelve any additional rupee from the earlier excise regime, say CIPI sources.