Budget 2020: Will FM Nirmala Sitharaman address Indian medical device industry's Woes?
Rajiv Nath January 23, 2020
Budget 2020: Applauding Govt's achievements, in the year 2019, Rajiv Nath, Forum Coordinator, the Association of Indian Medical Device Industry (AiMeD) said, "Even though the year 2019 witnessed significant developments but there is an urgent need for the government to accelerate further reforms and supportive measures in the year 2020 in order to make India a global medical device manufacturing hub, reduce huge import dependency in this sector which is still at 80-90%, minimising outgo of foreign reserves, and making quality healthcare affordable and accessible to the masses at large."
Sunrise sector of Medical Devices faces sunset year with 24 % sharp rise in imports
As the market is barely growing at 10-12%, overall the data of 24% increase in imports indicates further erosion of 10-30% domestic market share to 10-20% market share.
GST on medical devices gave a competitive advantage to imports by reducing the cost of imported medical devices by over 10% and is detrimental to Make in India. MSME sector has been worst hit with huge job losses.
If we compare other large developing countries, i.e., BRICS countries, we will find that India is possibly levying the lowest import duty on medical devices.
BRICS Countries Taxation:
Even as medical device makers in America allege the regulatory environment in India has hindered the growth of their exports, data suggests otherwise. India imports around 80 per cent of its medical devices (requirement) and over a fifth of that comes from the US. The Top five countries that India imports medical devices from are the USA (21%), Germany (14%),Singapore (11%), China 10% and Netherlands (7%)
There is an urgent need for the government to expedite steps to end the 80-90% import dependence forced upon us and an ever-increasing import bill of over Rs 38,837 Crore, expedite steps for patients' protection, stronger quality & safety regulations, price controls to make medical devices and quality treatment accessible and affordable and ethical indigenous manufacturing viable.
Reasonable Tariff Protection for enabling Make in India: Incentivise traders to become manufacturers as was the status a decade ago rather than the current status where we encourage manufacturers to import and sell under their brands. To promote the domestic medical device industry that will subsequently reduce India's heavy reliance on imports, the current basic import tariff of 0-7.5% needs to be over 15% for the medical devices (the bound rate under WTO is 40% duty) and concessional duty on raw materials may be retained at 2.5% for now, for next 3 years.
After GST, imported devices are cheaper by over 10% and this needs to be neutralised as at times we are unable to compete with Chinese imports in government tenders. In other countries such as Iran, as soon as a factory is put up, they start to support the domestically produced products with import restrictions and duty protection.
Level playing field for domestic manufacturers: If the government can boost manufacturing of mobile phones and consumer electronics by levying 15% to 20% duty as well as for automotive, bicycles and motorcycles, we request similar tariff protection clauses for medical devices, which are even more important for healthcare security of our country.
Unless the Indian manufacturers get a level playing field and visible benefits to manufacture in India in comparison to the imports, nobody will venture out to do this tedious job of putting together men, machine and capital for manufacturing of medical devices in India to make quality healthcare affordable to common masses which is a dream and mission of Prime Minister Narendra Modi.
Encourage a phased manufacturing plan of components: The government should increase the import duty to 5% (basic duty) on imports of part or accessories for medical devices, up from 2.5% done on January 19, 2016, by Notification No. 4/2016 and then increase the same to 7.5% in the second year under heading HS Code 90.18, 90.19, 90.20, 90.21, 90.22. The PMP (Phased Manufacturing Plan) proposed for X-Ray equipment is a good start and needs to be carried forward to other devices. Consider 2.5% basic duty on import of medical grade raw materials for medical devices under the heading also for HS Code 90.27, 30.06 & 38.22 on the actual user condition, as had been done earlier for 90.18, etc., to ensure there is no inverted duty structure.
India needs to regulate all medical devices under a patients' safety medical devices law as correctly proposed by NITI Aayog to protect patients and aid responsible manufacturing
Need to protect consumers from exploitatively high MRP in medical devices by rationalised price controls and aid ethical marketing by capping markup over import landed price.
Need to incentivise quality in healthcare products in public healthcare procurements by preferential pricing for quality, Q1 e.g. ICMED (QCI's Indian Certification for Medical Devices) instead of L1 (lowest price) to ensure patients access acceptable quality for healthcare.
The Indian medical device industry is very hopeful the Union Budget will make quality healthcare accessible and affordable for common masses, enable placing India among the top 5 medical devices manufacturing hubs worldwide and help end the 80-90% import dependence forced upon us and an ever-increasing import bill of over Rs 38,837 Crore.
Right from trade margin rationalisation to ensuring a separate set of legislations and regulatory framework to govern the medical device sector and everything in between needs to be looked afresh to galvanise domestic manufacturing. A pro-active policy formulation to regulate medical devices differently than drugs should permit free market dynamics to succeed and keep regulations simple, protecting consumers and incentivising Make in India.