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IDMA urges commerce ministry not to abolish advance licensing scheme for pharma exporters

Laxmi Yadav, Mumbai
Friday, May 19, 2017, 08:00 Hrs  [IST]

The Indian Drug Manufacturers' Association (IDMA) has urged Ministry of Commerce & Industry not to abolish advance licensing scheme for drug exporters as it will force them to invest substantial amount in importing raw materials including packing materials resulting in working capital blockage for almost three months and erosion of their competitive advantage in global market.

The export promotion schemes such as advance licensing/authorisation scheme, Export Promotion Capital Goods (EPCG) scheme have helped India to know as pharmacy of the world, exporter of high quality and low cost generic medicines to developed and developing countries, and the rest of the world. The country's exports of pharmaceuticals (formulations and bulk drugs) to both the developed and developing nations during 2015-16 was $16.89 billion with a growth of 9.44 per cent.
“With the abolition of advance licensing/authorisation scheme, the manufacturer exporters of pharmaceuticals at the time of import of raw materials and packing materials will have to pay basic customs duty (7.50%), CVD (12.50%), education cess (2% and 1%), special additional duty (SAD) (4%) totaling 26.42% plus anti-dumping duty as notified by government (at different rates for different products) upfront to fulfill the export orders. Considering the export margin which stands at 10-20%, this is an additional burden on the exporter making exports unviable,” said S V Veeramani, the immediate past national president of the IDMA.

The proposal to withdraw advance authorisation scheme was put forward by the ministry on 6th May 2017 at a meeting on mid term review of Foreign Trade Policy 2015-20. The move is part of the government’s first pay and then get the refund strategy. Implementation of GST from July 1, 2017 is said to be another reason for this initiative.

GST Council has assured manufacturer exporters of pharmaceuticals refund of 90% of the duty paid for importing bulk drugs and other raw materials in 7 days of execution of export order and the remaining 10% in four to five months. They are also eligible to receive 4-5 % interest if there is a delay in refunding. The time taken for completing the manufacturing cycle of pharmaceutical products and other export procedures after importing various raw materials is between 80 to 100 days.

The D&C Act stipulates that the raw material (API/Bulk Drug) manufacturers need to be registered with the DCGI for imports to India. As per Policy Circular 9 [FTP 2002-2007] dated 30.06.2003 issued by DGFT, import of raw materials from unregistered supplier under the advance licensing scheme is permitted, if the material is used in making formulations meant for export. The abolition of scheme will ban imports of raw materials from unregistered sources leading to loss of export business, said Veeramani.

As per the FTP 2015-2020 PARA 5.01 covering EPCG scheme, import under EPCG scheme is subject to an export obligation equivalent to 6 times of duty saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of authorisation. We understand that this EPCG scheme is also being abolished. It will increase the investments on capital goods to the extent of duty saved, he said.

If the present schemes (advance license, anti dumping duty and EPCG license) for export activities are withdrawn, the exporters will be forced to invest substantial amount and also pay higher rate of interest which is about 8.5%.There will be a working capital blockage for 80 to 100 days for 90% of the refund amount and for the remaining 10% reimbursement will take another 4 to 5 months, in addition to 100 days mentioned above. Therefore, the interest reimbursement proposed at the rate of 4% to 5% will not be adequate and it is a retrograde measure in the interests of the exporters, said Deepnath Roy Chowdhury, national president, IDMA.


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O. P. Singh Jun 14, 2017 2:05 PM
Government should explain the reason for changing the policy.
How this change will boost the export ?
First Government should find the remedy or scheme to solve the difficulties of the exporters.
Is it possible to get the huge amount from Government without paying commission to the officers.

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