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Run up to the Budget: Pharmaceuticals

State of the industry (2000-2001)

• Demand for bulk drugs and formulations is expected to increase due to an increase in domestic and export demand. Domestic demand for bulk drugs is expected to increase marginally.
• In the domestic formulation market, prices are expected to be under pressure due to increased price competition from generic players.
• During the April-December 2000 period, sales and net profits of 19 pharmaceuticals companies increased by 9.7 per cent and 36.4 respectively, as compared with those during the corresponding period in 1999.

Expected regulatory changes

The Patent Law, which has not been amended according to the provisions made by the WTO, is expected to be amended in 2001.

Industry expectations from the Union Budget (2001-02)

A reduction in the customs duty: The Organisation of Pharmaceutical Producers of India have asked for a reduction in the customs duty on drug intermediates and bulk drugs, from 35 per cent, to 20 per cent and 25 per cent respectively. However, the Indian Drug Manufacturers' Association has asked for no change in the customs duty on drug intermediates and bulk drugs.

Market size:

(Rs billion)	1999-2000 E	2000-01 F	Change
			(per cent)
Production	197.4	228.9	16.0
Bulk drug	37.8	45.3	20.0
Formulation	159.6	183.5	15.0
Imports	27.1	29.9	10.5
Bulk drug	20.3	21.4	5.7
Formulation	6.8	8.5	25.0
Export	65.2	79.3	21.6
Bulk drug	28.5	37.1	30.0
Formulation	36.7	42.2	15.0
Apparent domestic consumption	159.2	179.5	12.7
Bulk drug	29.5	29.7	0.5
Formulation	129.7	149.8	15.5

E: Estimate; F: Forecast

Source: CRIS INFAC

Tariffs:

(per cent)	Excise duty		Customs duty
	1999-2000	2000-01	1999-2000	2000-01
Drug intermediate	16.0	16.0	38.5	44.0
Bulk drug	16.0	16.0	38.5	44.0
Formulation	16.0	16.0	38.5	44.0
Life saving bulk drug and formulation	0.0	0.0	0.0	0.0

Notes:

1) The special additional customs duty of 4 per cent levied on all imports in 1999-2000 Union Budget has not been included in the customs duty.
2) Surcharge of 10 per cent on basic customs duty, levied in the 1999-2000 Union Budget, has been included.

Source: CRIS INFAC

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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