The government has approved a tax incentive package for the active pharmaceutical ingredient (API) industry to give a boost to its growth and ensure it is on a par with the industries in India, China and Bangladesh.
Earlier, the Prime Minister’s Office told the ministries and divisions concerned that PM Imran Khan desired to increase self-reliance in the API industry through concrete steps and special incentives to lessen the dependency on neighbouring countries.
In response, the Ministry of Commerce secretary requested the Ministry of Health Services secretary to make joint efforts for resolving the issues faced by the pharmaceutical industry.
Sources told The Express Tribune that the policy board of Drug Regulatory Authority of Pakistan (Drap) constituted a committee for coming up with concrete proposals and recommendations for the federal government’s consideration along with justification and comparison with the incentives given by the Chinese and Indian governments to ensure a level playing field for Pakistan’s API industry and enable it to compete in the domestic and global markets.
In the light of recommendations of the committee, the Drap policy board, in its 38th meeting held on June 18, 2021, approved the “Policy on Promotion and Incentivising the API Industry” for submission to the federal government.
The short-term incentives proposed in the policy included tax holidays for all API manufacturers, zero per cent customs duty, imposition of regulatory duty and tariff protection against import of materials manufactured in Pakistan and financial incentives like soft loans and keeping 20% export earnings.
For the long term, the establishment of API mega parks was proposed in the policy.
The Federal Board of Revenue (FBR) and Ministry of Commerce were consulted and the proposed amendments were incorporated into the draft API policy.
Though the policy draft was placed before the federal cabinet on November 30, 2021, it was withdrawn for further consultation. Later, the Finance Division was consulted and its views and comments were included in final version of the API policy.
In order to ensure the availability, affordability and production of APIs in the country, it was proposed that the draft policy may be approved by the federal cabinet.
During discussion in a cabinet meeting, the issue of sales tax on healthcare industry was raised. PM Khan highlighted that the launch of Sehat Insaf Cards had generated renewed interest in the private sector for investment in the health sector, which must be facilitated.
Special assistant to the prime minister on health revealed that he was discussing with the finance minister the reimbursement of sales tax paid on essential hospital equipment.
The Commerce Division pointed out that Point 2 of the API policy wrongly referred to anti-dumping duty as regulatory duty, which needed to be corrected.
The cabinet considered a summary titled “Promotion and Growth of Active Pharmaceutical Ingredient (API) Industry in Pakistan”, submitted by the National Health Services, Regulation and Coordination Division, and approved the proposal with the stipulation that regulatory duty should be replaced with words anti-dumping duty.
The National Health Services Division briefed the meeting that API production was technically complex and challenging, requiring technical expertise and investment. Advanced and efficient technologies were needed for API production to gain competitive edge, it said. The decision on which technologies to invest in and which products to make with these technologies needed careful consideration and should take into account the availability of suitable human resources, the meeting was told.
Other aspects include transfer of knowhow, capital investment, time required to start production, approval process and real market opportunities.
A majority of precursors, organic chemicals and other chemicals used in the basic and semi-basic manufacturing of APIs are required to be imported. The global API market currently stands at over $180 billion and is projected to go above $250 billion by 2024.
Published in The Express Tribune, February 22nd, 2022.
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