New Delhi: India’s drug price regulator moved swiftly to ensure that halving of excise duty in the 2008 Union Budget makes drugs cheaper by instructing companies selling drugs that are under government control to slash the retail prices by 4.58% immediately.
The National Pharmaceutical Pricing Authority (NPPA) issued a notification on Tuesday after finance minister P. Chidambaram reduced the excise duty from 16% to 8%, but neutralized the move partially by simultaneously increasing the base on which the excise will be calculated. Chidambaram had reduced the abatement rate from 42.5% to 35%. Some 74 bulk drugs and all medicine formulations that are made from them — constituting roughly 20% of the domestic drug market — come under cost-based price control of NPPA and will see prices fall.
“The reduction in prices of such scheduled packs shall however not apply” on those drug packs, clarified NPPA in a statement, where no excise duty has been paid to the government, referring to drugs made in states such as Uttarakhand, Himachal Pradesh and those in the North-East that enjoy zero excise duty.
This tax arbitrage, in the past few years, had caused an exodus of drug manufacturing units from Maharashtra, Gujarat and Punjab to Uttarakhand and Himachal Pradesh, though the halving of excise duty this year has reduced the advantage of such tax havens.