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IDMA urges commerce ministry to incorporate pharma sector under RoDTEP scheme to ensure competitiveness
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Laxmi Yadav, Mumbai
August 26 , 2021
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The Indian Drug Manufacturers’ Association (IDMA) has urged Union commerce and industry ministry to incorporate pharmaceutical sector under Remission of Duties and Taxes on Exported Products (RoDTEP) scheme to ensure competitiveness of drug exporters in the global market.
The drug industry has been completely overlooked while assigning the RoDTEP rates in the announcement made by the ministry of commerce on August 17, 2021.
The basic principle behind bringing in RoDTEP scheme, which is compliant with WTO norms, is to eliminate the embedded & hidden costs from exporters’ cost structure through direct compensation or rebate. The embedded & hidden costs are the excise duty and sales tax on fuel, electricity, etc. which impact transportation costs and energy costs.
This scheme will thus attempt to remove the inadequacies in the system and also help to make India’s products competitive in the world, by avoiding the export of taxes and duties.
Terming the exclusion of pharma sector from RoDTEP scheme unfair and discriminatory, IDMA stated “While the impact of hidden taxes and duties is considered and allowed for most of the industry sectors, the same has not been extended to the pharmaceutical industry. This anomaly needs to be rectified on priority as otherwise, our exporters will become non-competitive in the global arena. The impact will be most severe on the SSI and MSME units that survive on wafer-thin margins in the exports market. For them, this will imply significant loss, and they may not be able to survive in business.”
The pharmaceutical exports had reached US$ 24.41 billion in the year 2020-21. The target for the year 2021-22 has been set for US$ 29 billion. The industry has been able to achieve substantial growth in exports, thanks to the support and initiatives by the government at various levels.
However, with the recent withdrawal of Merchandise Exports from India Scheme (MEIS) and the exclusion of the pharmaceutical sector from the RoDTEP has been a dampener for the industry. This will also have a negative impact on the pharmaceutical exports, stated the industry body.
MEIS scheme was offered by the government as partial compensation for the inefficiencies faced and indirect taxes borne by the Indian industry which were not compensated through set-offs and exemptions. MEIS scheme was not really an incentive but helped the industry, especially the smaller MSME exporters to be competitive and promote their exports by becoming competitive in the global market.
“The Indian drug industry is also facing several other disadvantages such as port inefficiencies, higher rates of interest compared to global financial markets, delay in IGST refunds, inadequate infrastructure which lengthens exporters’ working capital cycle thereby increasing their financial cost, etc. In addition, the pharmaceutical industry is carrying an additional burden on account of the inverted duty structure locking its fund with GST portal. These handicaps also deserve compensation through rebates. These factors are so far not addressed,” said Mahesh Doshi, national president, IDMA.
All sectors are bearing the brunt of hidden and embedded duties and taxes in their business operations. The degree of impact may vary, depending upon their cost structure, energy intensiveness, level of transportation, and dependence on a multitude of factors. Hence all deserve to be compensated through the RoDTEP scheme, he said.
“It has been therefore disappointing to see that our industry has been completely overlooked while assigning the RoDTEP rates. Drug industry is bearing the hidden and embedded costs cannot be denied - it is surprising that the government has not allowed its fair compensation as promised in the RoDTEP scheme,” he stated.
The target set by the industry and the government to increase the pharmaceutical exports in the near future will only remain a dream if the required support is not provided to the industry, added Doshi.
IDMA has recently submitted a representation to the commerce ministry, department of pharmaceuticals, department of revenue and directorate general of foreign trade urging them to include pharma sector under RoDTEP scheme.
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