IDMA urges Centre to offer capital-linked budget incentives for pharma business

AHMEDABAD: With the Union budget set to be presented next week, Indian Drug Manufacturers Association (IDMA) has urged the Centre to make a provision for capital-linked incentives for pharma industry in order to help domestic pharmaceutical players compete with their global counterparts.

At present, the size of Indian pharma industry is estimated to be Rs 2 lakh crore, which the government and industry players aim to increase to Rs 3 lakh crore. “In order to reach the target level, the pharma industry needs to grow at an annual rate of 17%-18% as against 11%-12% growth registered over the past few years. IDMA believes that certain steps are required in the Budget and as policy decisions to achieve this growth,” said Viranchi Shah, vice-chairman, Gujarat State Board, Indian Drug Manufacturers Association (IDMA).

Indian companies have to constantly keep upgrading to the good manufacturing practice (GMP) level set by World Health Organisation (WHO) if they are to maintain parity with global players. This, according to IDMA, can be achieved by a provision allowing capital-linked incentives for pharma industry in the Union budget.

“The current credit-linked subsidy scheme (CLSS) provides for a small amount of subsidy. This needs to be increased. This will prompt most SMEs to upgrade,” Shah added.

The drug makers’ association has also requested the government to correct the inverted tax structure. As far as pharmaceutical formulation industry is concerned, the input tax at 12.5% is higher than 6% output tax rate, which leads to duty accumulation and blocking of working capital. “If this can be corrected in the GST regime or in the Budget, the industry will become more competitive,” he added.

Among other demands of IDMA include lower interest rate and corporate tax. Gujarat is a major hub of pharmaceutical industry and it accounts for 35% of India’s pharma market.