Government needs to introspect why even after 3 years of Make in India campaign, the Medical Device Manufacturing is still floundering in India.

Rajiv Nath, Forum Coordinator, Association of Indian Medical Device Industry (AiMeD)

Applauding Government achievements, in the year 2017, Rajiv Nath, Forum Coordinator, AiMeD said “Even though the year 2017 witnessed significant developments in the medical devices sector but there is an urgent need for the Government to accelerate further reforms and supportive measures  in the year 2018 inorder to boost medical device manufacturing within the country, reducing huge import dependency in this sector which is still at 70-90 percent, minimizing outgo of foreign reserves, and making quality healthcare affordable and accessible to the masses at large.

 Predictable tariff strategy for investors:

“To implement MAKE IN INDIA on ground and exploit potential effect on exports, and the 70 percent import dependent, over USD 10 billion Indian Market of Medical Devices domestic manufacturers seek a long term and predictable tariff strategy for investors who will only invest if they find it viable and profitable to manufacture Medical Device in India”, said Rajiv Nath, Forum Coordinator, AiMeD.

Basic Custom Duty (BCD) on Medical Devices having export turnover of more than:

  • Rs. 100 Crores (in any one of last 3 financial years), should be at least 15 percent, considering WTO Bound Rate for 40 percent. 
  • Similarly, for Rs. 10 Crores to Rs. 100 Crores, BCD should be 10 percent and  for
  • Rs. 5 Crores to Rs. 10 Crores, BCD should be 7.5 percent and for 
  • Less than Rs. 5 Crores, BCD could be at 5 percent or higher.

The linkage of growing exports is to demonstrate growing capability and international competitiveness of these Devices to silence critics or India will forever remain import dependent on unaffordable Medical Devices.

Increase in Basic Custom Duty ranging from 0 - 7.5 percent to 5 - 15 percent

The availability of GST Credit to importers has led to reduced cost of procurement and the only protection domestic industry now has, is Basic Custom Duty. Against the range of 0 percent to 7.5 percent Basic Duty on nearly 90 percent Medical Devices, the WTO (World Trade Organization) Bound Rate is 40 percent which means Nations under WTO can increase duty up to a maximum of 40 percent, if they so wish. Other BRICS Countries have Duty Rates as follows:

Import Duty on Medical Devices (HS Code 9018) in BRICS Countries

Products/ Countries

Brazil

Russia

India

China

South Africa

Medical Devices (HS Code 9018)

14 percent

0 percent - 15 percent

7.50 percent

3.3 percent - 17 percent

0 percent - 20 percent

 

The point we at AiMeD have been trying to make for a long time is that nominal import duty on critical items which can be made in India is not protectionism but sound Make in India economics to revive the floundering manufacturing sectorand the preferred policy tool the world over to boost domestic industry and employment. And we have already seen the beneficial impact of such steps in sectors like telecom, automobile and more recently in Electronics. Whereas we have allowed even Indian Manufacturers of Medical Devices to turn to cheaper imports.

The sector where manufacturing is thriving in India are Automobiles with 60 percent to 100 percent Basic Custom Duty(BCD), Motor Cycles with 60 percent - 75 percent BCD and Bicycles with 30 percent BCD.

To boost  domestic manufacturing of Mobile Handset and Components, Government imposed a differential duty of 10-12.5  percent. And the net result has been that every imported brand stepped forward to put a factory in India - whether Chinese or Taiwanese or American, including Apple.

With introduction of GST the differential Duty advantage was no more there and all foreign investors who had stepped forward were feeling stressed. The Government rightly revised custom duty on Electronics upto 20 percent recently to maintain the investment climate and same is sought for Medical Electronics where import dependency is 90 percent.

Though 2017 has been a very eventful and progressive year for the presently valued USD 10 billion Indian Medical Device Market starting from:

  • Medical Device Rules 2017. The new rules to regulate medical devices heeded the industry’s long standing demand to have medical device rules separate from drugs. 
  • NPPA capping the prices of Stents followed by orthopedic knee implants as well in a move to make Medical Devices more affordable and allowing Ethical Market competition. 
  • Subsequently, the National Regulatory Authority, CDSCO coming up with classification of Medical Devices.  
  • Mandatory  display of MRP on all imported (and indigenous) medical devices. 
  • Notification of accredited certified bodies under Quality Council of India for ICMED Certification
  • Inauguration of Medical Device Parks in Andhra Pradesh and in Telangana
  • Formation of Kalam Institute of Technology to promote indigenous R&D etc etc.

But the year 2018, will be a year to watch out for which would clarify further course of action to make medical devices more affordable. Much more needs to be done as the relief of correcting inverted duty structure needs to be similarly extended to other Medical Devices many of which are not in Chapter 90. Till now, there have been some significant measures and corrective steps but what we really expect is that this budget outlines and ensures a broad, country centric and comprehensive road map for boosting medical device industry within the country.

Specific Expectations from this Budget Session:

  • Extension of Inverted Duty Tariff Rationalization to Medical Electronics & Diagnostic. 
  • Increase in Basic Custom Duty ranging from 0 - 7.5 percent to 5 - 15 percent, as access to GST credit has made imports cheaper against earlier protection of 7.5+6+4 percent. Indian Manufacturers have only 7.5 percent protection now.
  • MoH to review & discuss Medical Devices Bill for Law drafted in 2016 with stakeholders - Medical Buyer Bureau 

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