Budget 2018: Makers of medical devices feel the pinch with 10% customs duty

The local manufacturers in the medical devices industry, which foots a Rs 273.4 billion imports bill annually, are in for a rude shock.  The finance ministry has decided to allow a 2.5 per cent exemption to device importers while it has raised the customs duty (to protect the local industry and encourage Make in India) to 10 per cent on certain devices as against the current 7.5 per cent. The latest move by the ministry effectively nullifies the impact of the customs duty hike. Local players claim that if no corrective action is taken, then 25 per cent of units may close in the next two years. 

Of the Rs 640 billion market size, local manufacturing is estimated to be around Rs 90 billion only. The market is clocking a 15 per cent growth rate, and so are imports. This year the import bill is estimated to cross Rs 300 billion. There is zero duty on a few devices (example stents), 5 per cent duty on some (laproscopes, accupuncture apparatus etc) and primarily most devices attract a 7.5 per cent duty (X-ray machines, syringes, blood transfusion apparatus, parts of hearing aids etc). The customs duty has been raised only for the 7.5 per cent slab, leaving the other slabs unchanged. 

Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AiMed), said that as it is, increasing the duty to 10 per cent was not enough compared to the protection given to sectors like automobile and mobile phones. 

“When the exemption list arrived, we were strongly disappointed. Giving an exemption of 2.5 per cent to importers effectively means there is no net change in customs duty. This would definitely not trigger Make in India. Why would a multinational bother to even make in India when it can import at such low duties, leave alone the domestic manufacturer,” he said. He further added that if government departments do not take supportive steps, around 25 per cent of the units might face closure in the next two years. 

No multinational firm, for example, makes the cardiac stents in India given that there is zero duty on imports. There are nine domestic stent makers, and the industry is confident that if imports dip, the domestic players can meet the demand.

Feeling The Pulse

• Rs 640 billion is the size Indian local medical devices industry 
• Rs 90 billion is the size of the domestic manufacturing 
• Rs 300 billion is the last year’s import bill Rs 273.4 billion is the estimated import bill for this year