The Hindu Business Line : Medicine prices set to come down

Mumbai, Dec. 8 The latest salvo from the Centre to stimulate growth will help bring down the price of medicines made in non-tax-free zones prices by about two per cent. But it also seems to be taking off much of the sheen from companies manufacturing from the tax-free zones, say pharma industry representatives.

On Sunday, a notification from the Centre cut by four percentage points the ad-valorem cenvat rate on non-petro products. Excise duty on medicines had earlier been halved to eight per cent, by the Union Budget ’08.

Companies who historically have their plants outside the tax-free zones will get the benefit of the latest initiative from the Centre. Taking the abatement also into account, this would translate into a price cut of about two per cent that will be passed on to the consumer, said a top finance executive with Ipca Labs. It was too early to understand the segments that will see the downward price revision, he added.

Drugs, whose prices are controlled by the Centre, such as vitamins from Piramal Healthcare for example, are made outside the tax-free zone and will get the benefit of the latest initiative. But critical drugs such as HIV/AIDS medicines and some cancer medicines are already free from excise duty, said a pharma analyst.

Less attractive

The Centre’s initiative is unlikely to have a major impact on medicines made in the tax-free zones in Himachal Pradesh, Uttaranchal, Jammu and Kashmir and Sikkim, the analyst added.

About 150 manufacturing plants are present in these four states, he said adding most of them are large generic players.

For instance, drug-majors such as Cipla and Piramal Healthcare see a large percentage of their medicines being made in the tax-free zones. But the difference between excise-payable and excise-free zones is reducing — from 16 per cent excise duty in non-tax free zones, to eight per cent and now to four per cent, the analyst said, pointing out that the excise-free zones were becoming less attractive.

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