Government should protect the manufacturing base in India by increasing basic custom duty on import of medical devices

Rajiv Nath, Forum Coordinator, Association of Indian Medical Device Industry (AiMeD) shares his expectations from budget 2022 for medical devices sector

Imports from China of price sensitive medical devices went up steeply by 75 per cent from Rs.5208 Cr in 2019-20 to Rs. 9112 Cr in 2020-21. This is a lost opportunity for Indian Manufacturers to grow & compete globally but saw with dismay dumping of Chinese imports when duties were slashed to zero per cent at the behest of importer dominant lobbies for COVID critical items.

Sadly these are the same Indian manufacturers/entrepreneurs, when imports got disrupted during COVID-19 crisis, the government relied heavily on them to meet the rising demand of essential COVID items for the country pushing the Indian medical devices sector to become self-reliant.

AiMeD has the following Budget recommendations to end the 80-85 per cent import dependence forced upon India and an ever increasing import bill of Rs 46000 crore:

• As done for mobile phones, the government should protect the manufacturing base in India by increasing basic custom duty on import of medical devices to at least 15 per cent from current 0-7.5 per cent duty though WTO bound rate is mostly 40 per cent. Due to such low custom duty India is importing Rs 46,000 crore of medical devices and is over 80 per cent import dependent. This 80 per cent can be reduced to below 30 per cent with correct policies as done for mobile phones and consumer electronics. The importers lobby’s excuse against increasing custom duty that impacts patients is misplaced – consumers buy devices on MRP, in the past when duties were reduced were the MRP reduced and benefits passed on to the consumers? MRPs are usually not changed with change in custom duty historically and there is scope to reduce these.
• Alternatively, the government needs to put an additional 2 per cent infrastructural development cess on imports that could be used to provide budgetary support to Department of Pharma that has the mandate to promote manufacturing of medical devices; build infrastructure of existing clusters and NIPERs; help to make medical devices parks and finance further PLI schemes.
• The health cess applied on some HS codes of medical devices need to be extended to other devices that are part of the 150 HS codes that govern medical devices and that were not covered in earlier notification.
• Instead of 18 per cent GST applicable on some medical devices that are not luxury goods, the GST needs to be a flat 12 per cent for all medical devices. Also reducing GST to 5 per cent is making Indian products non-competitive to imports as then manufacturers are unable to keep reduced ex-factory prices based on lower input costs net of GST.
• Trade margin: The purpose of low duty was to help consumers get affordable access to devices. This objective is not realised if consumers will be charged a high MRP of 10 to 20 times import landed price. Customs recording of MRP on Bill of Entry will assist to bring in data generation for policy making by evidence of a Trade Margin Rationalisation policy for the manufacturer/importer so that there is a capping of maximum 4 times on the ex-factory price on import landed price (at first point of sale viz. when GST/ import duty is 1st levied on entering into the market).

We request kind consideration of Government of India for encouraging domestic manufacturing to be sustainable in long term for becoming AtmaNirbhar and to address National Healthcare Security needs as defined in National Health Policy 2017 and for ease of doing business.