The Union Government will soon increase the abatement on Maximum Retail Price for pharmaceutical products by 5 per cent from the current 40 percent to 45 per cent.

However, the Government is unlikely to review the industry demand to reduce excise duty from the current 16 per cent to 8 per cent, Union Finance Minister P Chidambaram told Pharmabiz at a press meet in Bangalore, yesterday.

The Finance minister said his ministry would stick to the 16 per cent excise duty on MRP. He also added that pharma companies could now approach the Ministry of Chemicals and Fertilisers on their problems in the wake of the excise duty on MRP issue which will be handled on a case-to-case basis.

The pharma companies will have to take the option of moving to the government of India recognised excise free zones at Baddi, Uttaranchal, and Jammu and Kashmir to capitalise on the product pricing benefits, he said.

But the pharma units in Karnataka who are reeling under the spell of excise duty on MRP stated that the Union Finance Minister was not willing to hear their side of problems resulting out of this issue. They further added that it was impossible for the Ministry of Chemicals and Fertilisers to bring out a solution to the problems on a case-to-case basis as stated by the Finance Minister.

It may be recalled that Pharmabiz had reported that Ministry of Chemicals and Fertilisers has recommended for an 8 per cent excise duty reduction from the existing 16 percent. But the Union Budget 2006 presented by the Finance Minister Chidambaram saw no such reduction. "This leaves the sector without a level playing field. This five per cent abatement on MRP will have no impact on the pharma industry. It works out to approximately 82 paise reduction for Rs 100 MRP, stated a section of members from the Karnataka Drugs and Pharmaceutical Association (KDPMA).

Under Central Excise norms, Section 4 is for evaluation of MRP and section 4 (a) is for invoice valuation. The MRP based evaluation was so far 40 per cent and now Union Minister has given a further five per cent reduction. "The Union Government is not looking at the real picture instead relief is provided on aspects which will hardly have any effect on the company earnings, added KDPMA members.