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 The Association of Indian Medical Device Industry (AiMeD), the umbrella association of Indian manufacturers of medical devices, has requested finance minister Nirmala Sitharaman to increase custom duty, correction of inverted duty structure and trade margin capping in the upcoming Union Budget 2024-25, to support growth of domestic manufacturing.
"The very low duty of zero to 7.5 per cent on medical devices all these years have not helped consumers if access to a local production base is being denied and market share domestic industry only 30%," said Rajiv Nath, forum coordinator, AiMeD in a pre-budget memorandum to the finance minister.
The customers who are bearing the brunt of out of pocket expense are exposed to artificially inflated MRP (maximum retail price) labelled imports. Indian manufacturers are forced to match this MRP, creating a skewed market place with unethical practices which are non regulated or ineffectively regulated, he said.
The Association put forward requests for support to curb the increasing imports. The imports are consistently growing for the last three years and grew 13 per cent this year. Imports have grown from Rs. 41,709 crore in 2019-20 to Rs. 68,885 crore in the year 2023-24, it added.
It noted that the requests made by AiMeD last year was not considered, even though the Department of Pharmaceuticals and the Parliamentary Committee on Health in its 138th report and GTRI report on the sector has been supporting a review of the tariff structure to enable viability of manufacturing to address the 15 per cent competitive disability factor. The Association requested the Ministry to increase custom duty to a nominal 10% to 15%, which could also be a predictable tariff policy.
It reminded the Ministry of its earlier assurance that there is a need to remove Nil Duty Exemption notifications, which have made it non viable to manufacture and motivated many manufacturers to become importing traders or pseudo manufacturers. The Association has recommended even concessional duty exemption notification that reduced duty to 7.5 per cent, earlier.
"This removal of exemption duties on some devices was also recommended by DoP in line with the National Medical Device Policy of 2023 released by the Honorable Prime Minister which seeks to convert a 70% imports dependent Bharat to not only be an Aatma Nirbhar Bharat, but also the leading Global Manufacturing Hub of Medical Devices as stated in NMDP 2023," it said.
There is also a need to reschedule the duty revision of key components of x-ray equipment that had been planned under the Phased Manufacturing Programme (PMP) as manufacturing of these components have not yet started and the duty increase is now creating an inverted duty structure as imports of x-ray equipment case is from Korea, under the Nil Duty Free Trade Agreement. The Department of Pharmaceuticals has also endorsed these recommendations, it added.
The organisation asked the Ministry to correct the inverted duty structure by levying cess of 5% custom duty on balance medical devices. In 2020, this was applied to five of the four digital HS Codes and the rest of the 22 HS Codes are pending, it said.
The trade margin capping needs to be implemented by monitoring MRP of imports, if found over 10-20 times of cost, insurance and freight price. It also requested the government to allow income tax benefits for Capex and research and development investments in medical devices.
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