Karnataka's pharmaceutical sector is heading for a serious crisis with introduction of MRP based excise duty and the proposed VAT regime from April. Pharmaceutical units in the state are already showing a negative growth with a major slump in revenue generations since the last two months. Introduction of MRP based excise duty has pushed the contract manufacturing units into a serious crisis in the State.

On the VAT compliance, companies are sore about the lack of clarity and there is no clear picture emerging despite the fact that the Union government is promoting it as a 'progressive tax system'. According to Jatish N Seth, secretary, Karnataka Drugs and Pharmaceuticals Manufacturers Association (KDPMA) and the director, Srushti Pharmaceuticals, traders are demanding the 8 per cent refund from the industry which the government is supposed to pay after six months. "We feel drained out hence it is only better to wait and watch how such issues are going to be sorted out", he added.

With these problems around, the industry does not seem to have much of a hope to grow in spite of the coalition government's sops and strategies for promotion.

The pharmaceutical industry in Karnataka contributes Rs 350 crore as taxes to the State exchequer and provides employment for 12,000 people. Its growth rate is between 10-12 per cent as against the national pharma growth of 12-14 per cent. Pharma products worth Rs. 2,000 crore are produced annually, which is 10 percent of the national production. The exports sales are Rs.850 crore which is 8 per cent of Indian exports.