Small scale pharmaceutical industry sought PM’s help to remove anomalies created by MRP based excise duty
NEW DELHI: The small scale pharmaceutical industry has sought Prime Minister Manmohan Singh’s help to remove anomalies created by maximum retail price (MRP)-based excise duty system for medicines.The system puts small units at a disadvantage by squeezing their margins as compared to big pharmaceutical companies based in excise-free zones.
The government has been levying excise duty on the MRP of medicines since 2005.
Prior to this, the duty was charged on the wholesale price. The modified system was implemented to discourage high trade margins at the retail level. Small drug manufacturers have, however, alleged that bigger companies located in excise-free zones were taking advantage of the new system by printing higher MRP on decontrolled medicines.In a letter to the PM, the Small Pharmaceutical Industry Confederation general secretary Jagdeep Singh said: “Deliberate anomalies have increased excise burden manifold on industry prompting it to migrate to excise-free zones of Himachal Pradesh and Uttarakhand.”
As per estimates, about 40-50% of the Rs 33,000-crore retail drug market is manufactured in the excise duty-exempted states of Himachal Pradesh, Uttarakhand, Jammu and Kashmir, and Sikkim. There are 74 essential bulk drugs under direct price control. Most large Indian and multinational companies have shifted their manufacturing plants to these states or have outsourced it to contract manufactures based in the region, to save taxes.
According to Mr Singh, big companies or multinationals are the sole gainers from such a policy as they manufacture decontrolled medicines from these zones and charge high prices.