Pharma units shifting out of Madhya Pradesh

Pharmaceutical units are in a tight squeeze in MP, in the absence of proper support from the state government, high excise duties and central sales tax, and inadequate arrangements for capital expansion.

A number of units in MP are either planning to migrate or are sick or have been closed. Most of the Indore-based units have skipped Madhya Pradesh and charted out expansion plans in Uttaranchal and Himachal Pradesh--tax havens for the units.

"Production has gone down by 40 per cent this year," a small-scale association said in a statement.

The units in Madhya Pradesh pay 16 per cent excise on retail price, and 4 per cent central sales tax, while units in Uttaranchal and Himachal pay zero per cent central sales tax and 1 per cent central sales tax.

"The state government should have lobbied with the Centre to protect the units," said the association. According to the Madhya Pradesh Laghu Udyog Sangh, as many as 103 small-scale units are closed now.

"The unit owners have found it difficult to face the stiff competition from units of states that enjoy a tax holiday," RS Goswami, president of the Sangh, told Business Standard.

The central government, according to Goswami, had issued a Drug Policy, 2006, which recommended a uniform 8 per cent excise duty on all drugs, although the excise duty and income tax were zero per cent in Uttaranchal and Himachal Pradesh.

"The excise duty should be on the sale price and not on printed retail price," said Goswami.

Unlike the Uttaranchal and Himachal Pradesh governments, the central excise is levied tax on retail prices, which makes local units uncompetitive vis-à-vis units in those states.

Naming the companies he said, "Vishal Pharmaceuticals, Indore, Fairdeal Formulations, Vostok Laboratories, Curewin Pharma (P) Ltd, Enbo Lab, Pure Pharma, Indore, Nicholas Piramal, Syncom Laboratories, Panjon Ltd, Parenteral Drugs (India) Ltd (Indore), Quest Laboratories, Soccrus Remedies and Devu Laboratories of Indore have expanded in Uttaranchal and Himachal, instead of Madhya Pradesh. This will have an adverse effect on production, which may fall by 60 per cent in days to come because the existing units will also migrate."

With a combined turnover of approximately Rs 1,000 crore, cost-effective drug manufacturing, bulk supply and exports, pharma units in Madhya Pradesh are the first choice of big pharma majors worldwide.

Government officials in the department of industries were not available for comment.