In this arena, we believe there should be two broad priorities for India. First, to ensure that there is timely access to affordable quality medicine for the underprivileged. Second, due to the global scale and impact of the Indian pharmaceutical industry, to ensure that we give it the most comprehensive support that it deserves.
The pharma industry is arguably India's most global industry (in terms of operations, employees and manufacturing). It is ranked third largest producer of drugs and pharmaceuticals globally, with over 20,000 players. This is testimony to the strong R&D, clinical and manufacturing resource and infrastructure in India.
Our huge and potential domestic market, and the global opportunity, provides a potent reason to strengthen our industry, and decide on the rules for domestic engagement and important partnerships /alliance on our terms.
Much resource has gone in reviving the general economy. What is now required is a targeted allocation of resource. The industry needs support to invest in R&D, in scale; to mitigate the risks of global business; as also contribute to better access of medicine in India.
Instead, the focus is on price control, in a situation where in India is among the lowest prices of medicine globally. We have to divorce the process of ensuring access of affordable medicine for the underprivileged, from the normal operations of the pharma industry. Otherwise, we would impact the very foundation of a strong global scale industry.
The Budget affords an opportunity to kick start the process of recognising the global status and vast potential of this industry. The industry deserves priority status akin to that of Infrastructure, when the government considers tax and other fiscal support measures. Further, some specific proposals are:
First, removal of excise duties across the board for all essential drugs is imperative. Second, to ensure the industry remains committed to R&D, the incentive of weighted deduction of 150% needs to be at least doubled; and extended for another 10 years. Also, since all R&D cannot be done in house, certain essential costs that are incurred outside the tax approved facilities should clearly qualify for the weighted deduction.
Third, we need to ensure that the overall tax burden should not increase through a change in MAT provisions and withdrawal of tax incentives; particularly for companies that have committed capital investments in SEZs and other notified backward areas.
Fourth, the increasingly heavy investment on environment, health and safety norms, despite low margins, needs to be subsidised.
A couple of decades ago, some wise people in government helped set up the generic pharma industry through a decision on patents. The industry is one of the few where we are ahead of China; though predictably they are catching up fast and strong, with all at their command. It is time for some wise people of today to reinforce this industry, to ensure it endures on a global scale for decades hence.