New Delhi, Mumbai: The pharmaceutical industry and the public health-care system are among the few to have been singled out for sops in the Budget for fiscal 2008, but stakeholders and analysts remain unenthused.
The allocation for healthcare in the Budget has been raised by 22% to Rs15,291 crore.
Top on the list of concessions for drug makers held out by finance minister P. Chidambaram was an extension by five years to March 2012, a tax break allowing pharmaceutical firms to set off 1.5 times the money they spend on research and development. The extension comes just in the nick of time—it was to expire 31 March this year.
Ranbaxy Laboratories’ managing director Malvinder Mohan Singh welcomed the extension on research and removing a 12.36% service tax on clinical trials for new drugs.
Glenn Saldhana, chief executive of Glenmark Pharmaceuticals said they were glad the R&D 150% tax incentive would continue for an additional five years. The top Indian drug makers spent roughly 6-7% of their revenues on R&D. In 2005–06, such spending totaled nearly $500 million (Rs2,210 crore), a growth of 26% over the previous year.
The Rs55,000 crore drug industry, which ranks 13 in revenues in the world and fourth by volume sales, will benefit from a reduction in customs duty on 15 types of machinery used in pharmaceuticals and biotechnology to 5% from 7.5%. Also holding cheer for the industry is a Chidambaram proposal that venture capital funding for biotech and new drug research won’t attract tax.
However, several key demands by drug makers have been glossed over again. The industry had asked for a 10-15 year extension to tax sops in research, halving of excise duty to 8% and waiver of customs duty and value added tax on some life saving drugs.
Public health got a shot in the arm with the minister marking Rs9,947 crore to the National Rural Health Mission, a two-year-old programme aimed at extending healthcare in villages. Programmes for polio eradication and AIDS-control will receive Rs1,290 crore and Rs969 crore respectively. The demand for ‘infrastructure status’ to benefit from priority lending at cheaper rates has also been denied.
Harpal Singh, chairman of hospital chain Fortis Healthcare, welcomed a reduction in import duties on medical equipment to 7.5% from 12.5%, but pointed out that there still remained a paucity in specialized healthcare or training of medical personnel.
Shares of drug and healthcare companies closed lower, but less than a 4.01% drop of the Bombay Stock Exchange benchmark Sensitive Index as investors thumbed down the budget. The BSE Healthcare index, which tracks 23 drugs and healthcare stocks, fell by 3.16% to close at 3498.93 points.