Excise duty sops to HP, J&K extended

Pharma companies are set to reap the benefits from the extension of excise duty exemption to Uttaranchal, Himachal Pradesh and Jammu and Kashmir by three years till 2010. But, it will hit small scale units all over the country.

Tax exemption from 2007 to 2010 has ensured that investments of big companies like Dr Reddy's, Nicholas Piramal, Torrent, Panacea, Jubilant, IndSwift and Unichem will continue to receive the benefits even after the initial sunset date of 2007.

Indian Drug Manufacturers' Association Executive Director Gajanan Wakankar said, "The extension of tax exemption in these three states in the backdrop of non-reduction of excise from 16 per cent in other parts of the country, one can only foresee more units shutting down in states like Punjab, Maharashtra, Gujarat."

The pharma sector currently attracts 16 per cent excise tax. Despite industry demanding that it be reduced to 8 per cent, the government has not conceded to its demand.

On the other hand, these three states have zero excise taxes, putting the SSIs in the rest of the country at sufficient disadvantage.

Concurs Confederation of Indian Pharmaceutical Industry Co Chairman PK Gupta, "Now with three extra years in hand, even the smallest player can go there. Those in southern parts can now plan such migration. As for those in north, they can either move to these regions or just face closure."

Contract manufacturing, in these tax havens, has been another area of concern for the SSIs.