Budget
2009 fails to pep-up biotech
It does not take into
account the critical comment from the Economic Survey which states
that: drugs price control should be limited to essential drugs in which
there are less than five producers.
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Pranab
Mukherjee
Despite major boosters like the removal of surcharge on
personal income tax, enhanced group specific exemptions and abolition
of the fringe benefit tax (FBT), Budget – 2009, gives
lukewarm benefits to all, and fails to make any impression especially
among the business sector including the pharmaceutical industry. It
hasn't taken into account a critical comment from the
Economic Survey which said that the 'drugs price control
should be limited to essential drugs in which there are less than five
producers. All other should have been decontrolled'. Compared
to the Economic Survey's annual Rs 25,000 crore, the revenue
generating target of Rs 1,120 crore this fiscal is a pittance, say
experts.
The UPA-II's first budget presented before the House on July
6, by finance minister Pranab Mukherjee, couldn't sweep the
business sector at large, thus giving very little scope to enhance the
development of the country, and provide an optimistic inspiration to
India's economic future. Like other markets, pharma and
biotech industry too look disappointed with no major announcements to
pep-up the existing scenario. For instance, the market for two
life-saving drugs and other nine specified drugs used for the treatment
of cancer, Hepatitis-B and arthritis is marginal and doesn't
have much impact on the industry; shows Pranab da's budget
still has miles to go.
Coupled with mixed reactions, the czars of the Indian biotech industry
share their happiness as well as disappointment on the budget and its
repercussion in the ensuing financial year.
BioSpectrum takes
a first person account of the Union Budget 2009
Sanjeev Saxena, chairman
& CEO, Actis Biologics, Mumbai, said,
“This year's budget is more for the common man than
for the corporate world. Incentives proposed should have some impact on
the investments and hence, may refuel the growth of economy. Abolishing
the FBT is welcome, as corporate India should be ready to start taking
more trips and hence this should refuel the aviation industry with the
result the transport industry will also see a change.� To
Saxena, the problem with this budget is that no incentives have been
provided for R&D or the pharma and biotech sector. “I
would have been happier had he (FM) put in incentives which would have
been allocated for new technology development or new drug development.
Also, direct investments into the biotech would have been highly
desirable�.
Dr GSK Velu, managing
director, Trivitron Group, said, “In the budget
there is nothing substantial for healthcare sector. For medical devices
segment, we were asking the same benefit which has been offered to
other even non-critical segments like mobile phones in which raw
materials and components imported for ultimate manufacturing in India
should be allowed duty free import. To our surprise, even this year,
this was not announced. All attempts has been in the direction of
encouraging imports and disincentivising local manufacturing
initiatives. We are most disappointed with this. Even for healthcare
sector, infrastructure status has not been granted which has been a
long term demand from the healthcare Industry.�
“Overall, it's a disappointing budget for
healthcare services and medical devices segment,� Velu quips.
This year's budget failed to provide the
much-sought impetus to the pharmaceutical industry, feels
Supratim Majumdar, industry
analyst, Healthcare Practice, South Asia and Midldle East, Frost
& Sullivan. “When R&D and
innovation are the buzzwords in the industry, and the R&D
spending as a proportion of revenue is continuously increasing
year-on-year, the finance Bill remained silent on incentives for
R&D investment,� he said. Pointing out on the
increased allocation for National Rural Health Mission over and above
the outlay in interim budget will expand the access of healthcare
facility, Majumdar said, “This consumption-oriented budget if
implemented means more money in the hands of people, and
that's going to increase private healthcare expenditure which
include expenses for medicines. That can be a boost for the pharma
industry.� He told that reduction of customs duty for 10
specified drugs and two life-saving heart devices from 10 to 5 percent
and 7.5 to 5 percent respectively, along with total exemption from
excise duty and countervailing duty will make the medicines more
affordable for patients. These include influenza vaccine and
nine other specified drugs used for treating breast cancer, Hepatitis-B
and rheumatic arthritis.
But there's something for the industry to cheer up. Pharma
exporters hurt by the global economic turmoil are going to benefit from
the one-year extension of the Export Credit Guarantee Scheme till March
2010; the decision to reduce customs duty on life-saving
drugs as well as some of the vaccine and cancer treatment products have
lightened the heart of the pharma industry. If tax reduction is giving
the benefit of cost effective treatment to patients, then cut in
customs duty on medical equipment specially heart devices will benefit
the healthcare sector.
As
Sanjay Nagrath,
vice-president (finance), Intas Biopharmaceuticals,
said, “We welcome the exemption of Advanced Tax payment on
small businesses, who are allowed to pay their entire tax liability at
the time of filing returns. Abolition of FBT and Commodity Transaction
Tax is good move for companies. Raising exemption limit of Rs 10,000 in
personal income tax is hardly any relief given to individuals.
Government has done well in allocating resources for welfare schemes
and targeting creation of 12 million jobs, which is a welcome move in
times of recession. Induction of Service Tax in the field of Law, in
case same is provided by Law firms to corporate, is a negative move.
Service tax paid to foreign agents toward commission under reverse
charge is discontinued. This is a positive move for corporate houses.
Scope of provisions relating to weighted deduction of 150 percent on
expenditure incurred on in-house R&D to all manufacturing
businesses being extended is a welcome step. Legitimate R&D
expenses, including filing patents to protect IP, which, in our view,
would need to be covered under the weighted deduction scheme.�
Congratulating the FM for identifying health and rural infrastructure
as focus areas in the Union Budget,
Gautam
Khanna, vice-president, 3M India Health Care Business,
said, “By significantly augmenting both the National Rural
Health Mission and the Rashtriya Swasthya Bima Yojana, the budget has
ensured greater access to primary healthcare services. By increasing
the Gross Budgetary Support with a special emphasis on rural
infrastructure and the 27 percent increase for the rural
electrification program, the primary healthcare sector will greatly
benefit and ultimately impact the common man. Healthcare delivery
systems will improve with further investments in infrastructure
development. We welcome the Finance Minister's proposal to
exempt the medical equipment sector from the increase in central excise
duties.�
Teruo Yasufuku, MD,
Astellas Pharma, said, “The budget is positive
especially for overall development of the rural healthcare. An
increased allocation of Rs 2,057 crore over
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and above Rs 12,070 crore to
the National Rural Health Mission will have a positive impact on the
national healthcare.� However, emphasizing on the much needed
awareness regarding organ transplant which is yet to make a significant
dent in India, Yasufuku says that the budget should have also focused
on providing better infrastructure and raising awareness concerning
organ transplant in the country.
Upbeat about the finance ministry's focus on the improvement
of healthcare infrastructure by increasing allocation under National
Rural Health Mission Tapan Ray, director general, Organisation of
Pharmaceutical Producers of India (OPPI), told BioSpectrum that the
budget proposal covering all BPL families under Rashtriya Swasthya Bima
Yojana (RSBY) with an increase in allocation by 40 percent, will help
in improving healthcare access.
Likewise,
K Chandran,
director, Wanbury, too is of the opinion that National
Rural Health Mission (NRHM) funding and rural insurance will benefit
the rural population, which comprises over 70 percent of the total
population of the country (approx. 1.15 billion).
Chandran said that 9 percent GDP growth target is good. But his concern
was the 'how' factor which is missing in the
budget.
But
Indranil Das,
vice-president- finance and accounts, Biocon, is neither
happy nor sad about the budget. “Overall, the
budget does not have any negative impact on the pharma industry per se,
however, by not amending most provisions it does not provide any fresh
incentives either. So I would say pharma industry has been budget
neutral,� he said with a smile.
However, experts in the pharma industry feel that had the government
announced a total excise exemption on 354 drugs specified in the
national list of essential medicines, then it would have made a strong
impact on the industry. The industry was carrying a lot of expectations
from this budget which did not come out well in terms of
infrastructure development, fiscal deficit and disinvestment
programme.
But hope never dies. In spite of some degree of disappointment with the
Union Budget-2009, the pharma and biotech industries are
holding on to what Martin Luther King, Jr, once said, “We
must accept finite disappointment but never lose infinite
hope�.
Anjana Pradhan (with
inputs from Nayantara Som, Shalini Gupta & Jaharara Parveen)