Pharma Inc opposes 15 per cent COVID-19 anti-dumping duty on Chinese chemicals

Pharma stakeholders are opposing CHEMEXCIL’s proposal to levy 15 per cent COVID-19 anti-dumping duty on chemicals from China. It has proposed that additional customs duty of 15 per cent should be levied on the entire quantity of chemicals imports and other products from May 1, 2020, to March 31, 2021, to safeguard the domestic industry.

Pharma associations like FICCI, IDMA, FOPE etc. have conveyed their opposition to this proposal before different government authorities and requested them to not consider these recommendations as they will adversely impact the industry.

The Government is examining CHEMEXCIL’s proposal for a levy of 15 per cent COVID-19 customs duty on all imports of chemicals falling under various chapters such as chapter 28 and 29. As such levies are charged as additional customs duties, the impact will be about 20 per cent increase in the customs duty paid.

It is noted that many of the chemicals listed in these chapters are used to make key essential drugs in the market. At a time, when the industry has been working closely with the government to ensure uninterrupted supply of medicines while maintaining price levels, even when the cost of manufacturing has gone up significantly, this proposed additional tax will have a far-reaching impact on the industry and ultimately the availability of drugs. It is therefore strongly requested, not to impose this proposed tax as it is against both public health and pharma industry,

On behalf of FICCI members, Pankaj Patel, Past President, FICCI and Chairman – Zydus Cadila wrote a letter to the Minister for Chemicals and Fertilisers informing about pharma operations which are already impacted at various levels on account of increase in input cost, transportation cost, lower productivity of operations, and increase in import cost due to higher exchange rates. It also highlighted that with this additional 15 per cent of COVID-19 import tax on chemicals and other products from China will be further compounded with additional import duty and have a serious impact on the financial operations of the companies in the challenging environment.

“We request that this proposal from CHEMEXCIL should not be considered as it will have a significant impact on the viability of pharma operations and hence the availability of medicines in the market, especially in these challenging times,” stated the letter.

Similarly, the Federation of Pharma Entrepreneurs (FOPE) also made a representation to the Secretary to Government of India and highlighted that these chemicals, especially covered under chapter 28 and 29 are extensively used by the pharma industry for the manufacture of APIs as well as drug formulations. The letter mentioned that if the proposal is implemented then the pharma industry will be most adversely impacted, particularly the API industry which is promoted by the Government.

BR Sikri, Chairman, FOPE said, “In the case of formulations, they are sold at ceiling prices as notified by the NPPA under Drugs Price Control Order, 2013. With a higher cost of inputs (API and chemicals), their viability will suffer and several drug formulations will become unviable to be manufactured resulting in a shortage of drugs in the country.”

He also pointed out that, “The logic behind the proposal of levying 15 per cent COVID -19 customs duty is that there is an inventory build-up in the country at present. However, this is misplaced. The excessive inventory at present, if any, may be due to a slowdown because of a nationwide lockdown. The industry is operating at around 50 per cent capacity at present and inventory will come up to normal levels once the economy opens up in due course. In the cases of dumping chemicals in the country as feared by some associations, the items may be identified by surveillance and anti-dumping duty may be imposed on such specific products instead of levying 15 per cent COVID-19 customs duty across several chapters covering hundreds of chemicals. We humbly reiterate that the said proposal will have an overall adverse impact on the industry, and should not be considered for implementation by the Government.”

The associations also cited that, in case, any dumping takes place, it will need to be handled at the micro level for the APIs or key starting materials (KSMs) in question and not by clubbing with other items, some which are not even manufactured in India. Instead, monitoring will have to be done on a case-to-case basis if dumping takes place. This will ensure timely imposition of trade measures such as anti-dumping or safeguard duty. Another suggestion was that if the polymer industry is facing any issue, such tax should be made applicable for their products specifically. But the pharma sector should be kept out from any such tax.

Reportedly, the cost of pharma manufacturing went up significantly in the last three months due to the increase in the price of raw material imports from China, hike in air freight charges and local transportation charges, among others.

The commerce ministry has already issued a recommendation of continuation of anti-dumping duty on chemicals from China.

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