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Pharma industry seeks R&D tax breaks

India's pharmaceuticals industry is seeking a tax break in the next budget to spur research and development and help it become a leading generic drug supplier, an industry official said on Tuesday.

"We are asking for a full tax exemption for 10 years only on revenues from royalties and licencing of intellectual property, provided they are invested in research and development (R&D)," D S Brar, chairman of the Confederation of Indian Industry's pharmaceuticals committee, told a news conference.

Currently, 50 per cent of the foreign exchange pharmaceutical companies earn from international licencing of any patent is tax exempt.

Finance Minister Yashwant Sinha is due to present the 2001-02 (April-March) budget in Parliament on February 28.

The committee also urged the government to set up a regulatory framework to prepare the industry for competition before the product patent regime comes into place by 2005 in line with India's commitment to the World Trade Organisation.

So far, the country's laws have allowed only drug-making processes to be patented. Domestic firms have copied drugs under patent abroad by slightly tweaking manufacturing processes and avoiding spending on research.

India is expected to table legislation in the coming months to allow the product patenting of drugs.

The legislation is widely expected to be approved because of the country's WTO commitments.

"The industry will chip in with world class manufacturing facilities," said Brar, who is also the chief of Ranbaxy Laboratories Ltd, India's largest pharmaceutical company in sales terms.

He said the tax breaks would encourage multinational pharmaceutical companies to conduct clinical trials in India because it would cut their costs dramatically.

Brar said the R&D efforts would also help India's pharmaceutical industry tap the $7-10 billion world market of drugs that are coming off patent in the next 10 years.

In volume terms, India's pharmaceutical industry accounts for 8 per cent of the world market of $340 billion.

The industry's wish list also includes removal of import duties on consumables and equipment used in research and development by private pharmaceutical companies, a benefit already extended to the government research centres.

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