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How can Budget 2021 unleash greater potential for healthcare and pharma sector

Similar to the anticipation for the COVID-19 vaccination, the healthcare industry is also looking forward to an incentive booster in the upcoming Union Budget

Shuchi Ray | K Baskar | Vinod Parashar | January 29, 2021 | Updated 13:56 IST
How can Budget 2021 unleash greater potential for healthcare and pharma sector
The medical devices sector and pharma sector play an indispensable role in improving healthcare access

The Indian healthcare industry has significantly evolved in the last decade. However, healthcare provision still remains inequitable. The basic challenge is accessibility to quality and affordable healthcare in most parts of the country. Further, factors such as changing demographics, rising life expectancy, and growing public awareness have contributed to a higher demand for medical care. The medical devices sector and pharma sector play an indispensable role in improving healthcare access.

Budget 2021

The current ecosystem is favorable in driving accessibility and affordability in the sector. The existing regulatory environment is witnessing a shift from an ambiguous, complex, and less transparent regime, to a more transparent and easier to administer system.

The government 'Make in India' programme now aligned with the "Atmanirbhar Bharat" initiative, promotes indigenous manufacturing; provides a platform for the sector - (i) to reassess its operating model, (ii) identify key imperatives for growth, and (iii) explore opportunities for creating a step change in the medical devices sector and pharma sector.

Apart from this initiative, the government has recently, announced and is in the process of implementing several policy measures such as Production Linked Incentives Scheme (PLIS) for healthcare and pharma sector, which aims at providing common infrastructure facilities and production linked incentives for medical devices and bulk drugs parks.

The present scenario provides an opportunity and rationale for manufacturing medical devices and bulk drug manufacturers in India.

Also Read: Budget 2021: Date, time, sector-wise expectations; everything you need to no

Though the government has taken steps from a manufacturing perspective, there is a long way to go with respect to Research & Development (R&D) units, contract research organisations (CRO) and clinical trials undertakings, which are still looking and hoping for incentives such as PLIs, in addition to the following relaxations/ exemptions/ incentives from Budget 2021 -

o Extending the benefits of "In bond Manufacturing" under Manufacture and Other Operations in Warehouse Regulations (MOOWR 2019) to R&D units, CRO and Clinical Trials units, who are mainly the service providers and can be considered as "other operations in warehouse" and allowed to be registered as Section 65 Units under Customs.

o Clinical Trials activities and development of new drugs (like Covid-19 vaccine) should be zero rated.

o Rationalisation of the list of "goods specified in list 21 and 22" of Entry No. 430 of Notification No. 50/2017-Customs dated 30 June 2017 to include all scientific and technical instruments, apparatus, and equipment such as lab reactor, generator electrode coulometer, differential scanning calorimeter and photochemical flow reactor, including their accessories, parts and consumables as amended from time to time. These goods are mainly for the R&D labs/ units of the pharma sector which plays a vital role.

o Clarity on Remission of Duty and Taxes on Exported Products (RODTEP) scheme, especially for export-oriented units (healthcare and pharma sector) so that they can avail RODTEP benefits in addition to other Foreign Trade Policy benefits.

Also Read: Budget 2021: Healthcare workers request govt to raise healthcare sector spending

Certain key policies and strategies that the government could execute are:

o Independent regulations for medical devices.

o Financial measures to incentivise manufacturing in this emerging sector and specifically a quick refund or rebate in form of drawback.

o Unblocking the credit and seamless credit eligibility of duty on raw material and capital goods.

o Preference for indigenously manufactured devices in cases of procurement by the government.

o Access to cheaper/subsidised funding for new projects under this emerging sector.

Even before the presentation of the budget, the Central Board of Indirect Taxes & Customs (CBIC/Board) recently relaxed norms for the import and export of COVID-19 vaccines through courier, at locations where the Express Cargo Clearance System (ECCS) is operational.

The Board has also amended the Courier Imports and Exports (Electronic Declaration and Processing) Amendment Regulations in this regard. Accordingly, the import and export of COVID-19 vaccines have been allowed without any value limitation.

Further, since the vaccines will be imported in durable containers which are equipped with the requisite temperature monitoring and tracking devices, etc., the regulations are suitably modified to provide for the export of durable containers including accessories thereof, imported in relation to COVID-19 vaccines.

Also Read: Budget 2021: Modernise infrastructure, increase expenditure; what healthcare sector expects this year

The guidelines provided in Circular No. 31/2005-Cus, dated 25 July 2005 are to be followed for import and re-export of durable containers through courier. Though this is done in order to ensure speedy clearance and distribution of COVID-19 vaccines, the CBIC is yet to provide an exemption from import duty in order to keep the cost of imported vaccines affordable for a common man, if free vaccination is not provided to all.

While the Make in India initiative is directionally right, its effect on enhancing access to affordable quality healthcare relies on its implementation.

A 'step change' is conceivable through collective change, with key levers being appropriate policy initiatives, nurturing local innovation and making India a worldwide hub for medical devices and pharmaceutical manufacturing. Similar to the anticipation for the COVID-19 vaccination, the healthcare industry is also looking forward to an incentive booster in the upcoming Union Budget.  

(Shuchi Ray is Partner, K Baskar is Senior Director and Vinod Parashar is Senior Manager with Deloitte Haskins and Sells LLP.)

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