The Pharma companies have urged the Union Finance Minister P Chidambaram to strengthen incentives for research and development and extend export-related tax benefits in the General Budget 2008.
According to estimates, revenues and profits of drug companies have plunged because of increasing pricing pressure and competition in important Western markets. A firmer rupee has also added to the problem.
On an average Indian companies earn 50 per cent to 80 per cent revenue from exports, which is very unlikely in present situation.
Cipla's chief executive officer Amar Lulla says that with the dollar playing havoc, "we wish the export incentives to pharma companies are extended for another five years."
Glenmark Pharmaceuticals managing director and chief executive officer Glenn Saldanha said that the discontinuation of this benefit will badly affect those enterprises who are in the process of converting their existing undertaking into a 100 per cent export oriented unit (EOU), "and those who does not have adequate means to move or set up a new unit in an SEZ."
The companies are hiving off their R and D units into separate companies to raise capital and reduce innovation-related risks.
However, companies in the country have very limited pipeline and in that too, most of companies are in early stages of development.
Lack of progress in R and D successes has also made raising venture capital more difficult. Now, companies want depreciation-related tax benefits to be available liberally even after such spin-offs.