Shift in excise duty policy on MRP of medicines hits small-scale units - Units shift base to hill states
Ruchika M. Khanna
Chandigarh, May 19

The shift in the policy for levying excise duty on the Maximum Retail Price (MRP) of medicines (as against excise on factory price) has not only threatened the small-scale drug industry in the country, but also led to a sharp hike in the prices of medicines manufactured in states having a tax holiday.

Though the MRP-based excise was introduced last year to overcome evaluation disputes, it led to more and more drug manufacturers shifting to the states of Himachal Pradesh, Uttaranchal and Jammu and Kashmir, which enjoy a tax holiday. Those who did not set up their own facilities in these states, are outsourcing their production to pharma companies set up in these hill states. It is estimated that by March 2007, more than half of the country's drug production is likely to be sourced from the exempt states. Thus, the revenue increase expected from the MRP-based excise regime, will not take place as the units are moving to states having a tax exemption.

These manufacturers in the exempt states have raised their MRPs several times over, to increase their own profit margins and margins to traders, and have thus captured a major portion of the drug market. For example, the MRP of a pack (10 tablets) of Amlodipine (for hypertension) manufactured in Aurangabad is priced at Rs 8.57, while the medicine manufactured in Solan ( Himachal) is priced at Rs 36.

So even as the common man suffers because of the hike in the prices of drugs, the small-scale drug manufacturers, too, are losing out on business. Talking to TNS here yesterday, Mr Jagdeep Singh, convenor of the Confederation of Indian Pharma Industry (Small Scale), said this disparity, wherein the manufacturers in tax exempt states were increasing MRP to capture the market, and the manufacturers (mainly small-scale units) in non-exempt states were forced to pay excise on the MRP, was detrimental to the interest of the latter.

‘‘The small-scale units were earlier burdened with the mandatory compliance to upgrade their facilities to international standards. The 5,000 small- scale drug manufacturers (in the non- exempt states) have been drained of finances. These units face eminent closure unless sops like the raising of excise limit of SSIs from Rs 1 crore to Rs 5 crore and decreasing the rate of excise duty from 16 per cent to 8 per cent are implemented. Though the Government of India had announced these sops earlier, the matter has not been approved by the Finance Ministry,’’ he said.

Courtesy : Tribune News Service
20.5.2006

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