Pharma sector seeks incentives to enhance spending in R&D activities

The pharmaceutical industry has asked the Centre to incentivise the sector to promote higher spending in research and development and bring down the taxes and duties on life-saving drugs and active pharmaceutical ingredients (API) to provide a fillip to its growth.

Besides, the wish-list of the industry for the upcoming Union Budget also figured in enhancing export incentives on drug shipments to compete with China.

With research-driven business becoming the business model for the industry, pharma companies strongly pitched for Centre adopting incentive-driven approach to enhance spending in R&D activities.

“Centre must announce some sort of incentives in the upcoming Union Budget to encourage more spending by SMEs on R&D,” Ind Swift Laboratories, Vice-Chairman and Managing Director, Mr N.R. Munjal, said here.

“The Government’s focus must be on how spending on research can be increased in the country because the country’s average expenditure on R&D is just 2 per cent which can be scaled up to 4-6 per cent with some support (incentive),” he said.

The industry has also sought that the Centre should exempt the expenditure on import of all capital goods, raw materials and consumables to be used for R&D purposes from Custom duty, besides making Cenvat credit available on capital goods used for R&D to reduce research cost.

Currently, the pharma industry’s annual market size including export is Rs 1 lakh crore with over 8,000 SME units engaging in this sector, said Mr Munjal, who is also the past President of Indian Drug Manufacturers’ Association.

Another major demand of the industry is to exempt all life-saving drugs from Custom duty which is at 5 per cent at present and rationalise the duty on formulations by reducing it from 10 to 5 per cent.

The pharma industry also wants that the excise duty on API to be reduced from 10 per cent to 5 per cent to bring on par with other pharma items.

Under the present rate structure, excise duty of 10 per cent plus 3 per cent cess is levied on API while final formulations are charged at 5 per cent plus 3 per cent cess, which results in blockage of huge funds, said Mr Munjal.

To boost the export of pharma goods, the industry wants the Centre to create a level-playing field by raising the quantum of export incentives to face the Chinese competition.

“To stimulate export, we need to have export incentives equal to what China is paying to its industry. Against just 2-4 per cent of incentives which we get here, China offers 9 per cent incentive,” Nectar Lifesciences CEO & Whole-Time Director, Mr Dinesh Dua, said.

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