ABLE seeks budget sops for BT sector

The Association for Biotechnology Led Enterprises (ABLE) has sought a relaxation of export obligations for biotech parks availing the special economic zone (SEZ) status. It has also sought a minimum requirement for setting up a biotech SEZ.

In a budget memorandum to Union finance minister P Chidambaram, ABLE has pointed out that the changes in the Foreign Trade Policy permit biotech companies in state-sponsored biotech parks to avail duty-free import of equipment, instrument and consumables; and tax holiday under Section 10A/10B of the Income Tax Act.

However, the benefits are available only to 100 per cent export-oriented biotech units and therefore similar to the benefits enjoyed by 100 per cent export-oriented units (EoUs) in other sectors.

Given the long gestation periods inherent to the nascent sector, ABLE has called for the export obligation norms to be made applicable after five years. The measure will help biotech parks attract a large number of innovative biotech companies.

Also, ABLE has recommended that the minimum area required for setting up a biotech SEZ be restricted to 25 acres or one million square feet of building area, similar to the norms specified for the IT Industry.

"For the Indian biotech sector to flourish it is important that Indian companies enter collaborative research programmes and important platform technologies, thereby permitting Indian companies to expand their existing skill base and shorten the timelines from research to commercialisation," it argues.

The existing requirement for withholding tax for technology transfer results in increased cost of import of technology.

For the Indian companies to acquire more technology, ABLE has recommended that the import of technology by the biotech sector be exempt from Withholding Tax up to 2010.

The exemption of customs duty on the import of research and development (R&D) equipment and duty refund/drawback for R&D consumables has also been urged.

The biotech sector is capital intensive necessitating investment in expensive R&D infrastructure. If India is to realise the potential of its scientific skill base at a commercial level, it is imperative to adopt measures that reduce the capital cost of R&D.

Presently, R&D equipment as specified in List 27 A and List 28 of the Custom Notification No: 26/2003 dated March 1, 2003 by DSIR-recognised research laboratories are exempt from customs duty.

ABLE recommends that the list be expanded to cover additional items essential for biotech and pharma research. In addition to these, due to the ever-changing requirement of new equipment, it is recommended that additional R&D equipment not covered in List 27A and List 28 be permitted to be imported duty-free based on DSIR certification.

Likewise, the import of R&D consumables, reference standards and reference books are subject to import duties around 33 per cent as no countervailing duty credit is available on R&D consumables. It therefore recommends that the import of R&D consumables, reference standards and reference books be made eligible for refund/duty drawback based on DSIR certification.

Another issue ABLE has raised is that of relaxation of excise duty on diagnostic kits for HIV antibodies.

"Presently, diagnostic kits used for the detection of HIV antibodies are exempt from customs duty under List 4 but are still subject to CVD/CED under the Central Excise Act."

"It is recommended that diagnostic kits for HIV antibodies and other infectious diseases also be exempt from CVD/CED as it falls within the category of life-saving drugs," it says.

The industry organisation wants duty exemption norms for imported life-saving drugs and diagnostics to include components for their indigenous manufacture.

"There exists a serious anomaly with respect to imported and indigenous life-saving drugs and diagnostics. Customs duty and excise duty is imposed on raw materials and components used by indigenous manufacturers for such products."

"The finished products, meanwhile, are allowed to be imported duty free. This is detrimental to indigenous manufacturing and instead encourages trading. It also puts indigenous manufacturers at a disadvantage while competing with global companies," it says.

Therefore, ABLE recommends that components and raw materials used by indigenous manufacturers for the production of diagnostics and life-saving drugs be exempt from excise and customs duty or alternatively duty paid on components and raw materials used in the manufacture of life saving drugs be eligible for refund.