DEPB is an incentive offered by the government to exporters, whereby it refunds — directly or indirectly — the excise or customs duty paid on inputs used for manufacturing goods which are exported.
Withdrawal of the Duty Entitlement Pass Book (DEPB) scheme is expected to take the sheen off the local pharmaceutical sector.
DEPB is an incentive offered by the government to exporters, whereby it refunds — directly or indirectly — the excise or customs duty paid on inputs used for manufacturing goods which are exported.
The scheme is expected to be withdrawn on June 30.
An industry veteran said the finance ministry is keen to withdraw the scheme, while the commerce ministry wants it retained as its withdrawal can severely affect exports.
The pharma sector is targeting export revenues of $25 billion a year by 2014, up from around $10 billion a year now.
“There is no doubt the withdrawal of DEPB will adversely affect the pharma exports,” PV Appaji, executive director of the Pharmaceutical Exports Promotion Council (Pharmexcil), told DNA.
“There are a large number of drugs and pharmaceuticals that are currently being exported under the DEPB scheme. The number of drugs covered under the duty drawback scheme is not much. In case the DEPB scheme is withdrawn, the sector is going to suffer significantly,” said Appaji.
According to DG Shah, secretary general of the Indian Pharmaceutical Alliance, if the scheme is withdrawn, the cost of Indian goods would go up in the international market, making them less competitive compared with goods from other countries.
However, research analyst Bhavin Shah of Dolat Capital Market said the DEPB withdrawal will not have any major impact on exporters. “It will dampen the spirits. But it is not a major blow. It could turn out to be a volumes game as protecting the margins could turn out to be a problem,” he maintained.
Appaji said the sector is already operating on wafer-thin margins and fighting competition from countries like China, which are showing aggression in exporting pharmaceuticals. “In case the government wants to withdraw the scheme, it can definitely do so. But, it should first put in place an equally good alternative.”
The procedures and operation of DEPB are easier than the duty drawback scheme, too, said Appaji. “For a large number of drugs, there are notified norms under the DEPB. It is not the case with duty drawback. Moreover, there are several inadequacies in duty drawback and it would not encourage the exports. There is no doubt the pharma exports are in for trouble in case the DEPB is withdrawn,” he explained.
Pharmexcil, set up by the ministry of commerce, is believed to have submitted the feedback of the sector on the withdrawal proposal to the ministry. However, it is yet to hear anything from the ministry.
According to the industry veteran, if the government pays heed to the concerns raised by the export promotion councils, there is a likelihood of the scheme being extended, may be up to March next year.
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