Excise withdrawal move in HP, Uttarakhand stuck with finance ministry despite PM's letter
Joseph Alexander, New Delhi

Union finance ministry is understood to be holding up the proposal sent by the Prime Minister's office to restrict the area wise excise exemption to only those drug units manufacturing under their own licences. PMO has written to the finance ministry following a recommendation by the Economic Advisory Committee in this regard.

It is not known whether the PMO in the letter to the Finance Minister, has sent any specific direction to implement it soon. Sources said, the letter was just seeking the status of the file, after the EAC headed by Dr C Rangarajan suggested withdrawal of the tax exemption to the contract manufacturers in the excise free zones of Baddi in Himachal Pradesh and Uttarakhand.

The move from the PMO came amid reports that some in the Finance Ministry, particularly the Minister of State Pawan Bansal, were among those trying to delay the file aimed at giving a level-playing field to the SSIs in pharma sector fighting for survival. Bansal's son owned a pharmaceutical unit at Baddi.
The SSIs felt that the letter from the Prime Minister would put pressure on the FM to implement the same which he agreed upon long back. The notification could come anytime now, they hoped.

On the other hand, a section of the SSIs representing units in excise-free zones and large units who are opposing the withdrawal of the exemption still hopes that the proposed change would not be easy to come through as it involved modifying original notification on the excise-free zones.

The Prime Minister while accepting the recommendations of the EAC, had instructed the Finance Ministry to take a favourable decision in this regard in a letter dated December 8, 2006. Finance Minister P Chidambaram in his reply dated December 21, 2006 had in principle agreed to go by the instruction of the PM. But the file has been pending ever since, thanks to interventions from those in the Finance Ministry and industry.

Meanwhile, the small scale sector was abuzz with rumours last week that the Finance Ministry had already approved the EAC recommendation. However, officials in the Ministry scotched down the rumours, saying that it was `still under consideration.'

The entire pharmaceutical industry has been divided on the issue, forming blocs as excise-free zone and non-excise free zones. Both sides have been engaged in high-pitched lobbying with concerned ministries for sometime now.

Around 900 units from the excise free zones of Baddi and Uttaranchal have formed the Federation of Indian Pharma Entrepreneurs to stall the proposal along with the IDMA. Many IDMA members are also going to be affected if the exemption is withdrawn.

Source: www.pharmabiz.com
23rd July 2007

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