With the Central Government refusing to make any changes in the MRP linked excise duty assessment system in drugs, the closure of thousands of SSI drug manufacturers is fast turning to a reality. Ninety per cent of the SSIs, which were depending on outsourcing jobs received from the pharma majors, have turned jobless as big companies have refused to renew their contracts. Apart from the ones who have their own limited marketing network or the ones catering to government contracts, all other companies have stopped production, SSI leaders say.

The SSI drug makers, represented by the Confederation of Indian Pharmaceutical Industry SSI (CIPI), is engaged in last ditch efforts to save the industry from extinction, it is learnt.

According to T S Jaishankar, chairman, CIPI, the confederation has decided to approach the Chief Ministers of states that neighbour the excise free zones of the country. The CIPI would try to convince the CMs on the serious adverse effect the MRP linked excise duty that is to have on the state based industries. It is through these CMs, the confederation is attempting to build up pressure on the UPA Government. The fresh strategy has come after the central ministers failed to heed the views expressed by the SSIs during the last several weeks. The CIPI had approached all central ministers, and UPA leaders, including chairperson Sonia Gandhi, to save them from the nearing disaster. The CIPI is also hurriedly preparing a fact file to be printed and circulated among all concerned to create more awareness about their plight.

The huge turnout from all parts of the country for the dharna organised by CIPI and Indian Drugs Manufacturers Association (IDMA) here on March 18 was a demonstration of the agonies of the SSI sector.

The SSI sector alleges a planned strategy behind the recent rules that are driving the sector to the brink of extinction. "It is to be observed that it could not be a matter of chance that, firstly, the patent act was introduced curbing the expansion of the industry, it was followed by mandatory application of amended schedule 'M', the provisions of which have been straight lifted from the US FDA. Not content with these stifling provisions, the government has also proposed a set of rules related to the trade margins of the industry, which though have not been enforced as yet is under active consideration," SSI drug sector complains. Speaking to pharmabiz, CIPI leaders said that more than 9000 units, employing lakhs of persons, are in serious trouble due to the recent rules.

According to CIPI, the earlier location polices of government had led to a balanced spread of Pharma Industry all over India so as to serve people better. This balance is now totally disturbed by government granting Income Tax free and Central Excise duty-free status to Himachal Pradesh, Uttaranchal and J&K States. Units in these favoured states have huge unfair advantages over units in other states, which cannot compete unless they also move to the same 3 states. This is leading to exodus of entire Pharma Industry to the North, causing severe disturbance and panic, especially amongst employees, Small & Medium Enterprises (SMEs) and ancillary units, they explained.

The last nail in the coffin of the SSI industry was hit through this notification of MRP based Central Excise Duty. All these events which have come one after the other in the last five years, are an indication of the intentions of the govt. which seems to be following the US pattern of industry where there is no room for small-scale sector, they alleged.

The implications of notification dated January 7, 2005 issued by government levying Central Excise Duty on retail price of medicines instead of hitherto practiced norm of payment of Central Excise Duty on Ex. Factory price has brought the whole pharma industry in general & the small scale industry in particular to the cross roads where they have no option except either to close shop or move to some tax free zone. Small scale units account for nearly 50 per cent of total drug production in the country & majority of the rural demand of medicines is met by SSI sector by supplying low cost medicines, they said.

They feel, the cruel order of 7th January 2005 has given a severe blow to thousands of pharma units all over India (except 3 states named above where unfair advantages given at the cost of tax-payers have increased further). With intra-industry contracts cancelled and pharma industry in the rest of India being artificially weakened through unbearable blows, thousands of employees are sitting idle, investments of thousands of crores are facing dark future, acute uncertainty in young Pharma technocrats is rising and their confidence is dwindling. This is bound to ruin our National Pharma Industry and the huge public contributions it has made over the years, unless corrective actions are taken by Central Government immediately.

"Since the financial viability of SSI units after application of this notification is threatened, most of these would close down causing unemployment creating a job loss for ten lakh workmen. This will comprise both educated, semi-educated members of our society. Infrastructure worth thousands crores of rupees, which was recently created to comply with norms of amended schedule 'M' would go down the drain.

"Prices of medicines are most likely to go up due to the impact of MRP based Central excise duty. Availability of medicines shall be affected particularly in the rural areas," they have warned. As a consolation, the CIPI and IDMA have appealed to the government to reduce excise duty to 8 per cent from the 16 per cent at present and to increase minimum nil excise turnover limit for SSI units to minimum Rs 3 crore from the present limit of Rs 1 crore, if roll back of MRP based excise is not possible.