Gujarat drug manufacturers resort to novel method to urge govt not to hike excise duty

Concerned over the speculation that the central government in its forthcoming budget may hike the central excise from 4 per cent to at least 8 per cent, the pharmaceutical manufacturers in Gujarat have started a new method to drive home the point that any hike in excise duty for pharma sector will result in closure of thousands of units in the country.

Under the new method, every Gujarat drug manufacturer will individually send memorandum to the Union finance minister Pranab Mukherjee once in every three days, urging him not to hike excise duty on pharmaceuticals which will put the industry on the verge of closure.

If the government increases excise from 4 per cent on pharma products, then the industries in the 23 states of excise zone will be on the verge of death, said Kamlesh Patel, managing director of West-Coast Pharmaceutical Ltd in Gujarat. He said the excise zone pharma industries will have to cut their production because their business will be transferred to excise free zones in the country resulting in increase in unemployment in all these 23 states of excise zone.

"We also kindly draw your attention towards the increases in new self financed pharmaceutical college all over the country and in near future Pharmaceutical graduates and post graduates will come out. To give employment to such technical persons drug and pharmaceutical industry should be flourished in all parts of India which is only possible if industry stands in competition," the memorandum said.

Patel, who is also the president of IDMA Gujarat state chapter, said that if the government increases the excise duty, pharma industries' economy will become unbalanced. Due to creation of excise free zone, balancing in working of the industry is disturbed and state as well as central government will lose revenue and cost of medicines will increase again.

The memorandum said that the pharmaceutical industries in the excise zone (23 states) were producing more than 70 per cent of pharmaceutical products (medicines) before the government declared excise free zones. Due to creation of excise free zone in various states, several units are facing a lot of difficulties to capture domestic market and many units in excise zone are closed or are on the verge of closure. From the excise free zone, the government is not getting any revenue but on the other hand expenditure increases to develop infrastructure in excise free zones.

The government's steps to come out from recession were appreciable to reduce excise duty from 8 per cent to 4 per cent and that is the reason majority of pharma industry in the excise zone of 23 states survived in recession period. Due to decrease in excise, many companies passed on the benefit to the customer by decreasing the MRP on drugs and pharmaceuticals, the memorandum said.