Recommendations for Foreign Trade Policy 2020-2025: Pharmexcil

GST rate on most formulations falls under 12 per cent or five per cent and for a few essential medicines perhaps nil

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Pharmexcil export of drugs

Last Updated on January 1, 2021 by The Health Master

On behalf of the Indian pharma industry, the Pharmaceuticals Export Promotion Council of India (Pharmexcil) has submitted recommendations for consideration/ incorporation as structural reform in the upcoming Foreign Trade Policy.

In its submission to the Ministry of Commerce and Industry, the Council has provided details related to enhancing the scope of merchandise exports from India to other markets and increasing value addition in the country.

Along with these, it has also highlighted the key challenges faced by the industry which require course corrections for creating a holistic and a conducive ecosystem to capitalise on the full potential of sector’s capabilities and attract investments in the pharma sector.

Due to the C-19 virus pandemic, the existing Foreign Trade Policy 2015-2020, which was valid up to March 31, 2020, has been extended till March 2021.

Dr Dinesh Dua, Chairman, Pharmexcil said, “The Indian pharma industry has always been under pressure because of issues like pricing regulations, stricter implementation of pollution control norms, higher manufacturing costs, lack of financial incentives like lower tax, cheaper utilities, land subsidy and lack of large-scale mega parks with shared infrastructure for manufacturers.


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Hence, it will be prudent for India to have a holistic and a conducive ecosystem to capitalise on the full potential of its capabilities and attract investments in the sector.”

“GST rate on most formulations falls under 12 per cent or five per cent and for a few essential medicines perhaps nil. However, under the GST regime, the loan license charges and commission paid by drug manufacturers to their agents and stockists and other similar services fall within 18 per cent slab of GST.

It results in blockages of working capital for those drug manufacturers who are mostly operating out of a domestic market and for whom the tax paid on input services is not being allowed for purposes of computation of refund arising on account of the inverted duty structure.

Therefore, in our submission to the Ministry for designing the Foreign Trade Policy for the next five years, we have highlighted the major issues pertaining to the pharma sector, particularly MSME Segment which are obstructing the growth,” Dua informed.

According to Pharmexcil, amongst the major issues, which need attention from the government are:


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1) Logistics and supply chain hurdles: The country has the highest logistics cost. For instance, road infrastructure, there are multiple taxes including toll tax and high clearance time at inter and intrastate borders.

2) Land registration: It takes a long time, approximately one to one and a half year. Overall ease of doing business to be improved.

3) Policy stability, defined approval timelines and simpler regulatory approval process, pricing rationalisation, single-window accountability.

“In addition, we need exclusive measures towards export promotion, i.e, (PIC/S membership, enhanced aligning with stringent regulatory agencies, tap the untouched markets like China, Japan, incentivise exports, fiscal incentives for R&D, market development assistance for pharma and compel ‘Discover in India’ vision,” Dua highlighted.

Besides, the Council has also recommended the creation of marketing development assistance (MDA) Fund for ‘Discover in India’ vision. It also recommended the use of Rs 20,000 crores outlay for research through national research funds (NRF) to augment the existing funding for pharma innovation immediately – from current Rs 1500-2,500 crores to Rs 7500 crores ($1 billion) to take the overall spend on pharma R&D to 0.2 per cent of GDP.

“Lastly, but very importantly, RoDTEP detailed study has been submitted to the Committee headed by Gopal Pillai wherein we’ve suggested six per cent as against three per cent of MEIS. We requested the Ministry of Commerce to consider actuals and not just replace it with MEIS,” said Dua.


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