Financial Daily from THE HINDU group of publications
Friday, Feb 22, 2002
Industry & Economy
Drug firms' plea on export obligations
P.T. Jyothi Datta
NEW DELHI, Feb. 21
SMALL drug manufacturers, having waited for a reprieve for four years following the abolition of the `value-based licence' (Vabal) scheme, have sought a one-time extension to help clear their export obligations.
This segment of the Rs 23,000-crore pharma industry found itself labelled as "defaulters" when the Government scrapped the Vabal scheme in 1997, in favour of the Duty Entitlement Pass-Book scheme.
The Indian Drug Manufacturers Association (IDMA) has brought the issue to the notice of the Government through a recent letter to the Union Commerce Minister, Mr Murasoli Maran.
In its representation, IDMA observed, "As far as value-based licences were concerned, the extension in the export obligation period was conditional to such licences being first converted into quantity-based licences (Qabal)."
This was not practical since "it signified that the export obligation would increase several-fold," Mr Yogin Majmudar, Vice-President, IDMA, told Business Line.
The Vabal scheme was scrapped due to its misuse by sections of the industry and bulk drug manufacturers got caught in the crossfire, he pointed out.
"The inputs by the bulk drugs and pharma industry are essentially hazardous in nature and can only be imported in large quantities as containerised cargo and for this reason, the Vabal scheme became the most opted for by the small drug manufacturers," he said.
In the last two years, Qabal was given a six-month extension to be regularised and the Exim Policy of last year promised an extension to fulfil the export obligation.
However, even this did not bring the much-awaited reprieve to exporters availing of the Vabal scheme, he observed.
Elaborating on the impact this stalemate had on the industry, he said that importers were being labelled defaulters by the Directorate-General of Foreign Trade and this could lead to their IEC (import-export code) being blocked.
"Subsequently, domestic exporters are not given export incentives and this puts them at a disadvantage in a competitive environment, particularly given the imports from China."
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