The pharmaceutical industry now has cause for cheer as the finance minister has finally responded to their demands for the setting up of a pharma research and development (R&D) fund.
He has also proposed giving R&D companies a tax holiday for 10 years and raising the weighted deductions for research expenses from the current 125 per cent to 150 per cent. In the amendments to the Finance Bill, he has proposed the setting up of a Rs 150 crore fund to be utilised for promoting R&D. In fact, he has acceded to most of the demands made at a recent meeting of pharma industry representatives organised at the behest of Suresh Prabhu, minister for chemicals and fertilisers. However, where the money will go is not clear.
The high-powered committee on research and development, headed by R A Mashelkar, had recommended the setting up of an apex body called the Drug Development Board with powers to seek, screen and fund projects in identified areas of R&D.
However, the committee's report has been forwarded to the task force on knowledge-based industries which has yet to submit its report.
It also said the government needed to give priority to allocation of funds for R&D on diseases relevant to developing countries which are not commercially attractive to companies.
These measures meet a bulk of the demands of the industry.
"This Bill has given a positive signal to the industry and is likely to boost research and development of pharma companies," said V K Kaul, senior vice-president, finance and corporate services, Ranbaxy.
A couple of minor demands have not been addressed by the Bill. These include the duty-free import of capital goods and duty relief in case of imports of rare chemicals for research purposes.
These, however, are minor points. The bulk of the demands of the industry have been met. The proposals with respect to venture capital funds, are also likely to benefit the industry.
The high-powered committee on research and development had included various recommendations on venture capital funding in its report.
They included the setting up of a new venture capital fund specifically for the pharma sector. The fund is to be created by contributions from the Industrial Development Bank of India, ICICI, Life Insurance Corporation and Unit Trust of India among others.
