Skewed Duty Structure Must Be Rationalized To Encourage Manufacturing in India – AIMED

New Delhi, Jan 16, 2015: Association of Indian Medical Devices Industry (AIMED) has said that unless skewed and lopsided duty structure is rationalized manufacturing of medical devices in India will never really take off, with or without Green or Brown FDI. Every Finance Minister laments about downslide in manufacturing but does not take the steps to create the rational tariff structure to encourage this. Succor may be given to dead/dying units when it’s too late on piecemeal basis without a structured reform and segment specific strategy.

AIMED has pointed out that currently import duty on finished medical device is far lower than duty on raw materials and inputs that go into making of medical devices resulting in making imports much cheaper than domestically manufactured devices.

As of now, the Basic Duty on imported medical devices is 0-5 % with nil SAD compared to 10% Basic Import Duty plus 4% SAD on inputs. This results in significant price differential between domestically manufactured goods and imports leading to commercial non-viability of most domestically manufactured devices.

“India manufactured goods are further disadvantaged by (a) Export encouragement policies followed by countries like China and; (b) import substitution policies in the form of ‘Preferential Public Procurement Policies’ that are again followed in countries such as US and China to encourage domestic manufacturing “, said Dr Velu , Mg. Director of Trivitron. For example, the Chinese government subsidizes all exports of medical devices by 17%. So even if an exporter sells below cost by 7%, he still makes a profit of 10%! This is topped by 25% Preferential Pricing Policy for Chinese manufacturers with 0% foreign equity! We don’t even have a Buy Indian formal policy, even USA has a Buy American policy, he quipped.

The skewed tax structure has resulted in making India heavily import dependent in medical devices with overall import dependency at 70 % per cent and as high as 90 % in some segments such as electronic medical devices.

In addition, it has also resulted in steady closure of many domestic medical device manufacturing units with many erstwhile manufacturers simply turning importers to be in the business.” When duty on competing imports are reduced by 17% in last five years with no proportionate reduction of duty on our raw materials etc it’s not viable to manufacture for Indian investors how will having a 100% auto approval route for FDI make it viable for foreign MNC’s ?” queried Dr. Velu.