The pharmaceutical units in the excise free zones are planning to move to Supreme Court, if the Government decides to withdraw the tax exemption as recommended by the Economic Advisory Committee (EAC). This will aggravate intra-associational bickering in the pharmaceutical sector over the issue of tax exemption to contract manufacturers.

Even as the proposal in this regard is still held up in the Finance Ministry, the Federation of Indian Pharmaceutical Entrepreneurs (excise-free zone) - representing nearly 900 units in Baddi of Himachal Pradesh and Uttarakhand is meeting here later this week to chalk out further strategies.

The Federation formed recently, by the units in the excise-free zones to fight for their cause and stall the proposal, has already met the officials in the PMO, Finance Ministry and Chemicals Ministry, besides writing to CIPP and the IDMA to seek support in the struggle.

"We still hope that the Finance Ministry would not take such a step to withdraw tax exemption to the contract manufacturers of excise zones. Because, it is a complex issue and is not easy to be implemented as the original notification on the excise free zones needs to be amended. If they do it, we will have no other option but to challenge it in the Supreme Court,'' federation leader and president of Uttaranchal Pharmaceutical Manufacturers Association Prakash Setia told Pharmabiz.

He said the campaign unleashed by the rivals was baseless to large extent. They were giving wrong explanations to misguide the people. It was not true that the drugs were manufactured elsewhere and were billed in Uttarakhand to enjoy the benefit, he said.

"Another allegation is about the quality of drugs. Almost all the units here have implemented Schedule M provisions and there is no question of inferior quality of drugs. And the compliant about selling drugs at higher MRP rates is also wrong. We have at least 200 examples in which the prices have come down,'' he claimed.

"How can the Government withdraw the exemption in one fine morning after luring all these units into the excise free zones and making them invest huge amounts. It is not easy to replant them suddenly. If the exemption is withdrawn, 90 per cent of the units will be closed down and over four lakh people will be jobless. The banks alone have at least Rs 5,000 crore stakes as loans to these units,'' he explained.

The meeting, scheduled on July 26 here, will discuss the latest developments and chalk out the further action plans including the possibility of approaching the Apex Court. The Federation leaders would again meet the concerned officials in different ministries to press their views.

Last few months have seen intense lobbying by groups who oppose and support the proposal. It is learnt that the Prime Minister himself was keen to see the exemption scrapped to give a level-playing field to the small scale units which are already in struggle for existence.