To deal with the financial crisis in the pharmaceutical industry due to Coronavirus (COVID-19), the Federation of Pharma Entrepreneurs (FOPE) has written a letter to the PM Modi requesting the government to provide financial assistance for continuing business operations in domestic as well as in the export markets.
In order to maintain social distancing to prevent the spread of COVID-19, the pharma industry, which falls under the essential commodity category has been allowed to have a workforce up to 25 per cent. However, a significant fall in the business activities both at domestic as well as at the international front has been observed as a consequence.
Considering the fact that the industry, which is heavily dependent on China for the APIs and intermediates, finding price erosion of certain APIs during COVID-19, and the Chinese suppliers are asking the advance payment against the delivery. Hence, on behalf of the industry, the association has requested that the working capital requirement of the business should be automatically made double without any collateral, fresh application.
The nationwide lockdown in the country has also affected the production and the pharma industry is facing the challenge to continue the operations. Hence, it has requested the government to give a six-month extension to due and overdue Letter of Credits (LC), so that the industry can continue to function and ensure that there is no shortage of essential medicines in the country.
Earlier, the Pharmexcil has also requested to the Reserve Bank of India (RBI) Governor, to consider giving an extension of six months for due payments against non-fund limits through LC for making the payments to the bankers. It has been more than a week since Pharmexcil approached the RBI, but it has not received any update from them yet. However, with the FOPE letter, the industry feels optimistic about hearing a positive revert on LCs front.
The letter to PM by FOPE also requests to the Government to reduce the import duty on all active pharmaceutical ingredients (APIs) and intermediates to five per cent and this benefit should go directly to the patients and not to the industry.
B R Sikri Chairman, FOPE said, “The Key purpose of our letter to PM on behalf of FOPE is to strengthen his hands, show our solidarity towards Nation as a citizen as well as manufacturers of this great country. Golden opportunity which is called blessings in disguise is knocking the door when the entire world is looking towards India to shift their facilities from China to India as many countries are losing their confidence with our neighbouring country. Financial assistance for revival and for the growth of the industry is a request from us and not a demand. LCs are going to be due and with the financial crunch gripping the health of our industry, we expect special attention to the life science industry, particularly interest subventions and making working capital double without any collateral and without any application. MSME is adversely affected. For them to pay salary to the staff is a big issue. To cover this damage, proposal has been submitted in our representation. To strengthen the hands of Government to develop API by domestic industry is another key issue raised by us, so that dependability on China is reduced to some extent otherwise it is a question of National security.”
The letter requests the authorities to consider the following points as well:
1) EMIs on all term loans should be deferred to six months to support the functions. The extended period should be added in the remaining maturity period of the loans and the same should be also back ended in the six months instalments.
2) Refund on GST and Income Tax to the companies concerned within a week’s time
3) Pharmaceutical formulations attract GST at 12 per cent, most of the input materials including bulk drugs, excipients and packaging materials attract GST at 18 per cent, this industry faces inverted duty structure under GST regime. Refund under inverted duty structure mechanism does not allow refund of ITC on special services and capital goods under Rule 89 (5), some solution needs to be implemented to motivate the manufacturer
4)To abolish GST on pharma all category of production ie; intermediates, APIs and Finished dosage forms, ancillary industry, packaging industry and benifits should be given to directly patient by reducing the medicines price
5) Advance tax due on Mid June and all statuary dues falling in coming three months should be deferred for a reasonable time. Similarly, the companies relating to all labour laws, factories act, and other statuary compliances related to the industry should be deferred by a few months for the smooth functioning of businesses in these difficult time
6)The deferment of External Commercial Borrowing (ECB), immediate clearance of all export benefits to exporters
7) All utilise bills like electricity, gas, coal and PNG among others to sustain liquidity withe the industry should be deferred by three months
8) Defer deposit of TDS for the next six months from April 20 to Sept 20.
9) Lockdown period should be declared as zero financial period ie, no interest on borrowing, no GSt on Excise liabilities, no time barred cases for a period of six months or so. Previous payments should be deferred for three months after lockdown period is over
10)For the lockdown period, the government should pay part of the salary and other allowance to the employees and during the lockdown period the contribution of EPF/ESI should be brought down to zero.
u.sharma@expressindia.com