The Union Budget 2006-07 has once again belied the hopes of Indian pharmaceutical sector as none of their representations found place in the scheme of things. While the hopes of the small scale drug manufacturers for a reduced excise duty regime to nullify the negative fall out of competition from excise free zones remained a pipe dream, the plea for tax exemption on anti-cancer and HIV/AIDS drugs met with partial success.

Of the lengthy list of demands submitted by the ministry of chemicals and fertilizers, only a handful of them have been considered for partial excise duty concession.

The only proposal that found mention was to reduce the customs duty on 10 anti-AIDS and 14 anti-cancer drugs to 5 per cent. It was also proposed that the duty on certain life saving drugs, kits and equipment would be reduced from 15 per cent to 5 per cent and will be exempt from excise duty and countervailing duty (CVD).

On fringe benefit tax front, the minister made some slight concessions for the sector by announcing his plans to exclude the expenses on free samples of medicines and of medical equipment distributed to doctors from FBT.

The areas from where the pharmaceutical sector, especially the small-scale pharma sector, could benefit are the plans for policy initiatives in cluster development. The government has announced plans for a time bound national programme, including marketing support, for SMEs functioning in such clusters.

Commenting on the budget announcement, Z H Charna, director, Organisation of Pharmaceutical Producers of India (OPPI) felt that the government has bypassed the concerns of the industry. "None of the assurances given by the administrative ministry were considered by the government. You talk about private public partnerships and the government taking the lead, but there is no positive move from the government side," he lamented.