The captains of industry by and large hailed the Union budget presented by Finance Minister P Chidambaram in Parliament today but expressed disappointment on the lack of major R&D sops.

The budget is extremely positive for the pharmaceuticals industry and the reduction in excise duty on goods produced in the pharmaceutical sector from 16 per cent to 8 per cent will bring down the healthcare costs, benefiting the common man, comments Malvinder Mohan Singh, CEO and MD, Ranbaxy Laboratories. "It is extremely heartening to note that for promoting outsourcing in research, a weighted deduction of 125 per cent has been allowed. This is a progressive step that will encourage more companies to come forward and contribute to the much needed in-country R&D activities," he said.

Welcoming the budget, Satish Reddy, managing director and COO, Dr Reddy's Laboratories Ltd said that the increased government spending on healthcare is bound to make a positive impact in pharmaceutical industry. "One major concern for industry, particularly export intensive pharmaceutical companies, is the appreciating rupee. Export growth in the first 9 months of the current fiscal is 19.9 per cent, down from 24.8 per cent in the corresponding period of the previous year, the lowest since 2002. Chemicals (which include pharmaceuticals) have suffered a steep drop, from 28.4 per cent to 10.2 per cent and have contributed to this decline. Some attempt has been made to provide relief to exports that are employment intensive but in general, industry has been exhorted to improved efficiencies to remain competitive," Dr Reddy said.

Commenting on the budget, K Raghavendra Rao, managing director, Orchid Chemicals & Pharmaceuticals Ltd said, "The reduction of excise duties should reduce inflationary pressures. The Pharmaceutical industry should have a lot to cheer about as there are some positives including reduction in import duty on capital goods, reduction of import duty on life-saving drugs and reduction in excise duty on all pharmaceutical products".

Showing a thumps up to the finance minister, Habil Khorakiwala, chairman, Wockhardt Ltd said that minister has generously accepted a little more from the industry's wish list by giving a tax holiday for the next 5 years for setting up hospitals in tier II cities and rural India. "(With this) the improvement of healthcare services in the country will get a major boost with the active participation from the private sector," he added.

Commenting on the budgetary recommendations and its impact on the industry, Mani Iyer, Director, Intas Biopharmaceuticals Limited said that other than reduction of custom duties and excise tax on pharma/biotech industry and setting a corpus of Rs 315 crores for R&D, there is no new policies to encourage new drug research for biotech companies. "By means of fiscal incentives, special grants and other tax friendly measures, the Finance Minister could have extended done more to promote R&D initiatives taken by corporate sector. In addition, the Budget missed a good opportunity to set up a fund that would encourage entrepreneurship in biotechnology," he added.

The overall macroeconomic indicators continue to show improvement and the Union Budget 2008-09 has clearly reinforced the strong image that India will attain on the world economic stage, avers Kiran Mazumdar-Shaw, chairperson, Vision Group on Biotechnology and chairman and managing director, Biocon Limited. "Perhaps the most important tax benefit announced for the sector is the 125 per cent Weighted average tax deduction on outsourced R&D, which sends a strong signal of the potential that discovery research holds for the Indian Pharma and Biotech industry," she stated.

However, Nicholas Piramal India Ltd has revealed its disappointment in the budget, as the allocations for exports and R&D initiatives were next to nil for the future growth. Dr. Swati Piramal, director-strategic alliances & communications, NPIL commented that the budget failed to meet the requirements of the industry in R&D, especially the need to address issues in section 80-IB in a proactive manner. The reduction of excise duty, which would have done three years before, would take some time to make its impact in the industry. "I think that the sops in R&D is quite small and is mainly for CROs while it is not clear whether the provision address the income royalty of the basic research," she added.

Though pointing out the benefits of excise duty and customs duty reduction, Dr Kamal Sharma, MD, Lupin pointed out that "The absence of any significant expansion of benefits on research, both in terms of scope and deduction, will impact the investment therein." The increase in short term capital gains may have an impact on the sentiments on the industry, he maintained on the overall scenario.

Ajith Kamath, chairman and managing director, Arch Pharmalabs Ltd appreciated the recommendations to increase of outlay for HIV treatment, Excise sops on pharma goods and lowering of duty and exemption for life saving drugs. "However, similar concession could have been extended to import of intermediates by Bulk Drug producers who manufacture Life Saving Drugs. This could have put the Indian Bulk Drug Industry on a even platform with China/other countries," he averred.

The excise duty exemption shall lead the development of the industry into zones other than excise exempt zones and would hence benefit the SMEs, according to Frost & Sullivan sources. The five year tax holiday for setting up hospitals in smaller cities would improve the penetration of healthcare into rural area, added the consultant company.

Sanjay Gupta, Managing Director - Emerging Markets & Regional Director - Business Excellence, Asia Pac , Johnson & Johnson Vision Care Though welcoming the budget recommendations, though expressing disappointment on lack of special packages for healthcare of blinds.