SME pharmas may get interest subsidy

THE government may provide an interest subsidy to small and medium-size (SME) pharma companies to upgrade their facilities in order to meet stringent quality protocols. This particular proposal in the draft pharma policy is getting support from different wings of the government. The Prime Minister’s Office is keen to take forward the proposal for extending 5% interest subsidy to SMEs facing a fund crunch in order to meet the health ministry’s revised good manufacturing practices (GMP). A group of ministers (GoM) reviewing the new pharmaceutical policy is likely to take a decision on the issue soon, an official source said. The Planning Commission has already accorded an in-principle approval to provide Rs 560 crore for the scheme in the Eleventh Plan. The proposal is likely to get a goahead even as finance ministry cautioned the government on the budgetary implications of providing numerous fiscal incentives proposed in the draft policy. Once implemented, the interest subsidy scheme is likely to benefit close to 2,000 SMEs drug makers. The scheme would also come to the rescue of drug makers in Gujarat and Madhya Pradesh, several of whom have closed down due to lack of capital while others are struggling to find resources to meet the new GMP requirements. Several companies have also defaulted on loan repayments due to paucity of funds. The new GMP norms notified by the Union health ministry became mandatory with effect from July 1, 2005. The new requirements are comparable with WHO GMP norms. While the new norms have helped in standardising drugs produced by the SME manufacturers to those available elsewhere in the world, the exercise has substantially increased the upgradation cost for manufacturers. It is felt by government officials that low-cost advantage of SME drug makers should be protected in the larger national interest by providing suitable fiscal incentive in the form of an interest subsidy. As per a report of the Development Commissioner (SSI), contribution of SSIs in Indian Pharma market is 50% by volume and 30% by value.
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Small Scale Industry Registration (SSI Unit)

Small Scale Industry Registration is most important for those who are manufacturers or Exporters to avail Government Benefits for their SSI Unit.

Benefits of Registering

The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. The regime of incentives offered by the Centre generally contains the following:

 – Credit prescription (Priority sector lending), differential rates of interest etc.
 – Excise Exemption Scheme
 – Exemption under Direct Tax Laws.
 – Statutory support such as reservation and the Interest on Delayed Payments Act.

(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word SSI in their exemption notifications. Though in many cases they may define it differently. However, generally the registration certificate issued by the registering authority is seen as proof of being SSI).

States/UTs have their own package of facilities and incentives for small scale. They relate to development of industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them.

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