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Saturday, February 18, 2012

Budget 2012: Incentive needed for enhancing spending on R&D in pharma sector

The pharmaceutical industry has asked the Centre to incentivise the sector to promote higher spending in research and development and bring down taxes and duties on life saving drugs and active pharmaceutical ingredients (API) to provide a fillip to its growth.

Besides, the wish-list of the industry for th upcoming Union Budget also figured in enhancing export incentive on drug shipments in order to compete with China.

With research driven business becoming the business model for the industry, pharma companies strongly pitched for Centre adopting incentive driven approach to enhance spending in R&D activities.

"Centre must announce some sort of incentives in the upcoming Union budget to encourage more spending by SMEs on R&D," Ind Swift Laboratories, Vice Chairman and Managing Director, N R Munjal said here.

"The government's focus must be on how spending on research can be increased in the country because country's average expenditure on R&D is just 2 per cent which can be scaled up to 4-6 per cent with some support (incentive)," he said.

The industry has also sought that the Centre should exempt expenditure on import of all capital goods, raw material and consumable to be used for R&D purposes from custom duty, besides making Cenvat credit available on capital goods used for R&D to reduce research cost.
Currently, Indian Pharma industry's annual market size including export is Rs 1 lakh crore with over 8,000 SME units engaging in this sector, said Munjal who is also past President of Indian Drug Manufacturers' Association.

Another major demand of the industry was to exempt all life saving drugs from custom duty which is at 5 per cent at present and rationalize the duty on formulations by reducing it from 10 to 5 per cent.


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