The small pharmaceutical manufacturers in the non-excise free zone of the country have urged Prime Minster Dr Manmohan Singh to restrict the excise exemption in Himachal Pradesh and Uttarakhand only till value addition on the lines of J&K and Sikkim where the tax sops were curtailed in March 2008 by the central government.

In a memorandum submitted to the Prime Minister, SME Pharma Industries Confederation (SPIC), an association representing mostly small pharma companies in non-excise free zone of the country, said that the government's efforts to increase revenue from excise will not bear fruits as the excise free zones alone have caused a whopping loss of Rs 70,000 crore to the government exchequer.

Stating that revenue loss and price rise of medicines is an interlinked problem; the SPIC said that even though the government has asked the excise commissioners to increase revenue from excise, reports suggest that revenue from excise has dipped. While excise sops have been curtailed up to value addition levels owing to misuse in J&K and Sikkim, Himachal Pradesh and Uttarakhand have been spared despite their record of misusing the tax holiday for price rise also, as reported by NIPER, the SPIC said in the memorandum.

Taking strong objection to the government for falling prey to the hectic lobbying by the excise free zones, SPIC said efforts to make up shortfall of revenue from non-EFZ tantamount to cross subsidizing of EFZ by units in non-EFZ who have been already rendered unviable owing to disparities. This is totally unfair and contrary to promised equity and justice.

SPIC also sought the Prime Minister's intervention in exemption limit for SSIs. Pharma SSI is deprived of its SSI exemption limit of Rs 1.5 crore as faulty abatement effectively reduces it to half. The Eleventh Plan and chemicals ministry justifies 75 per cent abatement based on 300 per cent trade margins but it has been reduced from 42.5 per cent to 35.5 per cent in Budget 2008. This might be justified when excise is payable not when it truncates the SSI exemption limit. The pharma SSI exemption should be fully allowed as per clearance value, independent of abatement, it said.