E Kumar Sharma
It is perhaps a no-brainer that fiscal challenges would be uppermost in the mind of Union finance minister Pranab Mukherjee as he gets ready to present the Union budget on March 16th. With the food safety bill, oil bill, inflation and the slowdown in the economy, few expect him to look at micro details. Most expect that he will focus largely on ways to contain the fiscal deficit. But those in pharma and healthcare sectors, a sector that may seem recession-proof, have long-standing concerns that they say they hope to have sorted out.
One of the pain points for the sector has been a long-standing demand to change the inverted duty structure. Today, on average, the excise duty is 4 per cent higher on APIs (active pharmaceutical ingredients or bulk drugs) than on formulations or finished products. Second, although this is not confined to the pharma sector, the announcement of a timeframe to put in place the common GST (Goods and Services Tax). A simplified common GST system will ensure multiple layers of levies are done away with as different states have multiple duty structures causing pain each time a producer wants to sell between states. Inclusion of income from the Special Economic Zone (SEZ) while calculating the liability of a company for Minimum Alternative Tax (MAT) would, some industry representatives have said, be detrimental and they hope the finance minister will keep the SEZ profits excluded in this.
There is also the expectation that perhaps the finance minister will listen this time to the demand that the weighted deduction under section 35(2AB) be extended to the expenditure incurred by pharma companies outside approved R&D facilities, i.e. clinical trials, bioequivalence studies conducted in overseas CROs and regulatory and patent approvals, which are directly related to R&D. A weighted deduction on in-house research & development expenditure is allowed to pharma and other companies. However, expenditure incurred outside the approved R&D facility is currently not covered. However, not many expect this to happen.
As for as the healthcare sector, there has been a long-pending demand of granting it infrastructure status. On the primary healthcare front, spending needs to be channeled towards malnutrition, women's health and infant mortality, given India's far from satisfactory performance on these parameters. Going by estimates of infant and under-5 mortality rates or the IMR (infant mortality rate) at 53 per 1000 live births and the MMR (maternal mortality ratio) of around 254 per 100,000 live births. Compared to the IMR of 19 and MMR of 45 in China and the IMR of 17 and MMR of 58 in Sri Lanka, India has a long way to go. Similarly, on tertiary care, the government could take to scale and look at ways to replicate some of the successful state health initiatives like the Rajiv Aarogyasri, the flagship scheme of all health initiatives of the Andhra Pradesh government, which provides cashless health cover to those below the poverty line.Surely, despite his macro concerns, there is lot that the finance minister can still do in this budget.