Ahead of the India’s Union Budget for 2008-2009, which is expected to be presented by Finance Minister Palaniappan Chidambaram at the end of February, leaders of the national pharmaceutical industry have reportedly petitioned the Department of Science and Technology to create more tax incentives for research-based firms.

Among its requests, the industry is asking for all R&D expenses, including the cost of regulatory approvals, to be made tax-deductible.

The pharmaceutical industry in fact comes under the control of the Ministry of Chemicals and Fertilisers which has, in the last two budgets, sought increased incentives for the drug industry including doubling the tax exemptions permitted for smaller research-based companies and for the current tax exemptions on R&D spending to continue until 2017, in order to provide stability for the industry. However, the government has rejected these proposals each time.

A current priority policy at the Ministry is to make more drugs more affordable. Minister Ram Vilas Paswan has asked the Finance Minister to exempt all 354 products now on the essentials drugs list from excise duty, and to halve it from 16% to 8% for all other medicines.

Mr Chidambaram is expected to present the Budget on February 29, and the three-month Budget session of parliament will commence on February 25, according to government sources. This is likely to be the last budget for the Progressive Alliance (UPA) government headed by Manmohan Singh, and observers believe ministers will take the opportunity to introduce measures which will be popular with the public. On January 7, Mr Chidambaram began his formal pre-Budget discussions and two days later he met with leaders of “India Inc” – including, from the pharmaceutical sector, Wockhardt chairman Habil Khorakiwala, Ranbaxy’s managing director Malvinder Singh and Nicholas Piramal director Swati Piramal - who asked him to cut personal tax rates in order to achieve a Gross Domestic Product (GDP) growth rate of 10%, and also to reduce the excise duty on manufacturing from 16% to 14%.

With the Congress-led UPA government likely to remain in power for just a little over a year, observers are also hoping for some decisive action from ministers soon on a range of pharmaceutical-related policy initiatives which have become stalled, for various reasons, over a number of years. These include the national Pharmaceutical Policy, which has been in development since 2002 with introduction scheduled for 2006 but which has still not been implemented, plus the proposals introduced in 2003 for a centralised pharmaceutical regulatory system throughout India, and 2004’s policy on data exclusivity, which is now four years behind schedule.