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Union Budget 2019 Spooks Pharma and Healthcare Cos as Government Overlooks Their Demands

Union Budget 2019 left the pharmaceutical and healthcare sector in the lurch, leaving little for the industry to boast about. Some of their demands, such as bringing down the corporate tax to 25 percent and resumption of 200 percent weighted deduction on R&D, were overlooked. Even the budgetary allocation for healthcare, with exception to Ayushman Bharat, hasn’t kept pace with the rising disease burden, demand for healthcare infrastructure and human resources. The total budget allocation for Department of Health and Family Welfare for 2019-20 stood at Rs 61,398.12 crore, a 13 percent increase compared to the current financial year. Excluding the Ayushman Bharat scheme, the increase in health allocation is six percent. The government even cut allocations to immunization or vaccination program by seven percent to Rs 6758.46 crore. For healthcare startups too, the budget didn’t address the problem of angel tax, which is a 30.9 percent tax levied on investments made by external investors in startups.

To be sure, most executives that Moneycontrol spoke weren’t too surprised by the Budget outcome. “Since it is an interim budget, with elections round the corner, we can’t expect the government to announce plans or address specific issues of the industry,” said Dr Murtaza Khorakiwala, Managing Director of Wockhardt. Khorakiwala welcomed the government attempt to put more cash in the hands of farmers through direct benefit transfer scheme and salaried middle-classes through tax rebates. “The government did well to balance the populist tone of the Budget by signaling its commitment to stick to the fiscal discipline path,” said Kiran Mazumdar-Shaw, Chairman & Managing Director of Biocon. “It was however disappointing to see the absence of any additional allocation for healthcare or incentives for Science & Technology. For the startups sector, angel tax holiday for 10 years was expected, but it did not happen,” Mazumdar-Shaw said.

Dr Azad Moopen, Founder Chairman & Managing Director, Aster DM Healthcare, echoed the same. “What we missed in this budget is the increase in budget pie for healthcare. We are hopeful that the government in the long run will certainly take a step further on this,” Moopen said. “Allocation to Ayushman Bharat has been tripled, which reinforces the commitment towards Universal Healthcare for all citizens and the vision for a healthy India by 2030,” said Dr Rana Mehta, Partner and Leader, Healthcare, at PwC. “However to spur demand from the middle classes, increased deduction towards medical insurance premium under section 80D could have been considered. Zero rating of Goods & Service Tax (GST) for the sector would have helped catalyze investment in the delivery space,” he added. Ganesh Sabat, CEO of medical devices maker SMT, said the statements of Finance Minister in Budget speech points to the government direction of price controls as tool to support implementation of Ayushman Bharat. – Money Control