The government will prune the essential drugs list to bring down the number of drugs and formulations in it to around 100. The list currently contains about 254 drugs and formulations, all of which are exempt from customs duty.
The list has grown flabby over time and a committee set up under the health ministry is recommending its rationalisation. The list of life-saving drugs has grown ad hoc and now includes blood group serums and burn therapy dressings soaked in gel.
The government is expected to announce a reduction in the size of the list in the forthcoming Budget. The finance ministry is also likely to announce the creation of a level playing field for imported and locally manufactured essential drugs.
While the committee has proposed removing 50 items that are now obsolete, an additional 95 drugs and formulations are sought to be removed as Indian companies have registered themselves for manufacturing the drugs in India.
However, representatives of pharmaceuticals MNCs claim that not all the drugs for which registration has been granted are manufactured within the country. Items likely to be struck off the list on this account include interferon, immuno-globulins and drugs for thallasemic patients.
Besides pruning the list, the finance ministry is also likely to accede to the domestic industry's demand to provide a level playing field. Manufacturers of life-saving drugs in India have to pay an excise duty of 15 per cent. This puts them at a disadvantage vis-a-vis imported drugs, which are not only exempt from customs duty, but are also not required to pay any excise duty.
The chemicals and petrochemicals ministry had suggested two options to the government. One was to waive all excise duties on life-saving drugs. This would not only benefit the consumers, but also not affect the government's resources, since the revenues from this category are not substantial. The other option was to impose a countervailing duty on imported life-saving drugs. However, the problem here is that the cost to the consumer could go up astronomically.
With the pruning of the list of life-saving drugs, the finance ministry may allow the first option as the cost of excise duty waiver will be far less. The finance ministry did not provide any exemptions in last year's Budget as it was felt that customs duty exemptions were not being passed on to the consumers.
