Close on the heels of the demand for a relief package made by the drug manufacturers in the excise free zones, the drug units in the non excise free zones have demanded for a similar package from the government on the plea that they have been suffering for years due to the anomalies in policies like MRP-based excise collection.
In a letter to Prime Minister Dr Manmohan Singh, the SME Pharma Industries Confederation (SPIC) has pleaded that it is not the drug manufacturers in the excise free zones who needed assistance from the government, but the drug manufacturers in the non excise free zones.
"It is amusing to learn that pharma industry in Excise Free Zones (EFZ) is demanding relief package as their advantage has been curtailed owing to four per cent excise cut announced by the government as a stimulus for a sagging economy. The units in excise free zones had migrated on their own," the SPIC said.
Opposing the demand for relief package to the excise free zones, SPIC brought to the PM's notice that more than 95 per cent of pharma units of excise free zones of Himachal Pradesh and Uttarakhand migrated not when tax holiday was declared in 2003 but when MRP-based excise was levied in January 2005, because the anomalies of the changed policy offered a huge advantage. Industry put on stake investment to reap a windfall from an anomalous policy which was also income tax free.
Reduction in excise due to a slowdown in economy has upset the units in excise free zones. But, still they enjoy 20 per cent excise advantage on items with high trade margins as well as income tax freedom. They can still entertain individuals to get their brands manufactured free of excise duty with MRP of choice something the units in non excise free zones cannot do. Lack of any tax on MRP was misused by the companies in the excise free zones to increase prices on labels.
The SPIC also brought to the PM's notice that excise free zones were created for new industrial units and not for units to migrate from other regions. Government has compiled data whereby many companies including some in top 50 have installed second hand machines instead of new mandated in excise free zones.
SPIC said that since the migrating units have already availed excise freedom for four years, they have no reason to complain.
On the contrary, 5000 SME units in non excise free zones were never temporary. They were providing employment as well as revenue to the government. MRP on their labels was a third as compared to that of excise free zones where even scheduled drugs were not spared. They should be considered instead for compensation as they suffered anomalies of a changed policy which was duly acknowledged by government itself first by Dr Pronab Sen Committee and again by EAC of the PM, SPIC said.