The Hindu Business Line : Medicines will be cheaper, but not consumer goods

Medicine prices are beginning to see the benefits of Budget 2008 proposals, but no such luck for consumer products such as breakfast cereals or pre-mixed tea, for instance.

Drug-makers will cut prices by five per cent on all medicines, except those made in tax-free zones. This follows the Budget halving excise duty on finished drugs to eight per cent.

Drugs made locally in the cancer, cardio-vascular, anti-diabetic, anti-ulcer and some newer antibiotics can see a five per cent downward price revision, said Mr D.G. Shah of the Indian Pharmaceutical Alliance. The difference will be significant on high-priced locally produced drugs, he observed.

IPCA’s Executive Director (Finance), Mr A.K. Jain, told Business Line that the price cut would be visible in the marketplace in a month or two. At present, existing stocks (manufactured before the Budget announcement) would have to be first exhausted by stockists and chemists, he said.

About 70 per cent of the local pharmaceutical production is manufactured outside the tax-free zones, he said, and all medicines rolling out of factories from March 1 would have the revised prices.

Also, Pfizer India’s Managing Director, Mr Kewal Handa, said multinational and domestic companies would benefit from customs duty on life-saving drugs coming down from 10 to 5 per cent.

There will, however, be no price cuts on medicines made out of tax-free zones such as Baddi in Himachal Pradesh or Uttaranchal.

And a similar predicament faces consumer goods companies too, despite Cenvat being lowered from 16 per cent to 14 per cent.

Some consumer goods companies operating from excise-exempt zones are not set to drop prices, while others find rising inputs costs curtailing their ability to cut prices.

Mr Adi Godrej, Chairman, Godrej Industries, said that the Budget is anti-inflationary. “However, its too early to predict if prices will actually come down.”

Breakfast cereals, pre-mixed tea and coffee, pan masala and even water purifiers have been given a respite in excise duties, but producers do not seem inclined to drop prices immediately.

Cereal-maker Kelloggs, which was on the verge of increasing prices, has now changed plans. Kelloggs’ Managing Director, Mr Anupam Dutta, said the company was planning to increase prices, as it had not taken a price-cut since 2005, despite commodity prices going up. “Now, with the reduction in excise duties, we will be able to hold over our impending price increase which had been planned for the Kelloggs brand.”

Mr George Menezes, Chief Operating Officer, Godrej Appliances, said that the input material, that is, steel prices have been increasing. Steel constitutes about 40 per cent of an appliance. In this scenario, it would not be possible to cut prices, he said.

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