A government panel has recommended that India reduce excise duty on all pharmaceutical products from 16% to 8%. However, such a move is unlikely to materialise in the near future. India's Finance Ministry is reported to be leading the opposition to the plan within the government.
The Indian drug industry is also undecided on the issue. A number of manufacturing units have recently relocated to excise-free zones in the country, such as in Baddi and Uttaranchal. If duties were now reduced, the value of investment in these areas which has reached a total of INR15bn (US$330.33mn) could be downgraded, with companies set to lose competitive advantage.
Industry leaders have criticised the migration of manufacturing to these areas, claiming that this strategy impacts the whole pharmaceuticals sector. India's chemicals ministry considers the reduction in excise duty as vital to secure the survival of a large number of local drug manufacturers.
India is the fourth-largest producer of pharmaceuticals in the world and its
roughly 3,250 producers account for around 10% of global production. Observers
claim consolidation in the sector is vital in order to sustain future growth
and profitability, and that domestic competition should be intensified rather