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Indian drug, biotech firms eye research bonanza
Tuesday, 06 July 2004, 19:30 IST
NEW DELHI: India's flourishing pharmaceutical and biotechnology firms want the government to offer incentives in terms of tax benefits in the upcoming budget for stepping up research activities in a wide spectrum of areas.
Industry representatives are also hoping that the annual fiscal package will lower the duties levied on import of equipments and raw materials with a view to bringing down the costs of drugs and making the local firms globally competitive.
Finance Minister P. Chidambaram will unveil the Congress-led coalition government's maiden fiscal budget Thursday.
The United Progressive Alliance (UPA) government, which is supported by Left parties from outside, is expected to present a budget that will mainly seek to boost agriculture and rural sectors.
"This year's budget is very crucial for pharma and biotech companies," said R.L. Bhatia, deputy director (pharmaceutical and chemicals committee) of the Federation of Indian Chambers of Commerce and Industry (FICCI).
"Offering tax incentives on research and development activities in the pharmaceutical as well as biotech industries tops the budget wish-list this time," Bhatia told IANS.
"At a time when Indian drug makers and biotech firms are beginning to get some recognition in the global market, a little bit of policy support at this stage will go a long way in boosting the sectors that hold great potential."
Industry leaders have called for extension of time limit for levying tax on in-house scientific research.
According to the existing official guidelines, no tax deduction will be available to companies undertaking in-house research activities after March 31, 2005.
Companies say the withdrawal of the benefit will have an adverse impact on research activities in the areas of drug development, biotechnology and chemicals -- areas where India has shown tremendous opportunity for growth.
They say foreign exchange earnings from any research based intellectual property rights should be exempt from tax provided the same is utilised only for the purpose of in-house research within a period of five years.
According to the Confederation of Indian Industry (CII), Indian pharmaceutical companies, having world-class facilities, should be encouraged to reinvest their research related earnings into future research activities.
It says scope of some tax laws should be enlarged to include expenses incurred on clinical drug trials, regulatory approvals and filing patent applications outside India.
"This will encourage Indian companies to succeed in the global arena with international patented drugs," CII said in its pre-budget recommendation submitted to the finance ministry.
It has also recommended that in order to facilitate filing of Abbreviated New Drug Application in regulated markets like the US and Britain, customs duty for import of materials for new molecules should be at five percent.
"This is necessary as it is a cost intensive activity," said the industry lobby group.
In the biotechnology sector, industry players say customs duties of 20 percent basic plus 16 percent counter veiling duty on the reagents and equipment imported for research and manufacture of products make the industry unsustainable.
"Diagnosis reagents are also used in HIV/AIDS monitoring, and cancer diagnosis and life science research," said an official of a Bangalore-based biotech firm, adding that the import duty on reagents needs to be brought down from 20 to 10 percent.
India's nascent biotechnology industry is expected to generate a whopping $5 billion in revenues and create over one million jobs in the next five years, according to an Ernst and Young study.
This growth is expected to come on the back of increased partnering activity, transition to a product driven model, growth in the bio-generics market and government initiatives to encourage investment and expansion, it said.
Source: IANS
Source: IANS