Pharma firms ditch Gujarat over tax sops

Pharmaceutical companies are leaving their traditional production hubs in Gujarat and Maharashtra in favour of states that offer tax concessions.

Himachal Pradesh, Uttaranchal, Jammu & Kashmir and the Union territory of Daman, which offer incentives, are the main beneficiaries of the trend.

Torrent Pharmaceuticals Ltd is setting up a formulations plant at Baddi in Himachal Pradesh at a cost of Rs 100 crore. The project is expected to be commissioned in the next fiscal year.

J B Chemicals and Pharmaceuticals Ltd, which has plants at Panoli in Bharuch, has set up a 100 per cent export-oriented unit and a tablet manufacturing unit at Daman.

"Setting up a plant at Daman means 100 per cent income tax exemption for the first five years after the plant goes on operation. For the next five years, the company will get 30 per cent income tax concession. We are also getting cheaper electricity. In Gujarat, we need to pay around Rs 5 a unit. In Daman it is Rs 2.50," said Kamlesh Udhani, executive director of J B Chemicals and Pharmaceuticals. There's more: The Vadodara-based Alembic Ltd has taken up construction of a new formulations manufacturing unit at Himachal Pradesh at Rs 30 crore. Alembic is also setting up a plant at Daman.

Zydus Cadila Healthcare Ltd, which produces all its drugs from its Ahmedabad plant, is also coming up with a plant in Himachal Pradesh.

Many pharmaceutical companies based in Maharashtra are also looking for locations at Baddi. Sun Pharmaceuticals has set up a plant in Silvassa. Monsanto India's plant is also in full steam there.

Alkem Laboratories Ltd has set up its cephalosporin manufacturing plant in Daman and Wockhardt has a plant in Daman which manufactures Aziwok, an antibiotic.

S P Adeshara, commissioner, Foods and Drugs Control Administration, said Gujarat's share in the national pharma production could fall from 45 per cent to 20 per cent over the next two years if the trend continues.

Stung by the development, Maharashtra is said to be considering some tax sops.

The Indian Drug Manufacturers' Association (IDMA), an umbrella organisation of pharmaceutical industries, has sought the intervention of the Gujarat government to curb the trend, which could lead to loss of job opportunities and revenue.

"The Gujarat government must wake up now to this reality and take steps to ensure that companies do not move outside," Yogin Majmudar, national president of IDMA said.

Pharma units set up in backward areas of Himachal Pradesh do not attract excise for ten years, whereas the duty is as high as 16 per cent in Gujarat. Then, there is an income tax holiday for five years and a concessional rate of income tax for the next five years. The cost of production is also considerably lower.

Dr Reddy's Laboratories and Cipla have already made their plants at Himachal Pradesh operational, while medium-sized players like Ajanta Pharmaceuticals Ltd and Unichem are also setting up facilities there.

Gujarat industries principal secretary D Rajagopalan said the government does not want companies to shift out of Gujarat, and the matter was taken up with the NDA government too.