What medtech sector wants from the Union Budget 2023?

Some of the other key recommendations of MTaI to the Union Finance Ministry are regarding the ease of starting a business, the registration procedure, the regulatory regime, business credit availability, taxes and cross-border trade

The research-based medical technology companies in the country have urged Union Finance Minister Nirmala Sitharaman to reduce custom duties at the minimum to 2.5 per cent and remove additional 5 per cent health cess imposed on imported medical device in the country. This will help in ensuring patients get long term access to quality medical devices especially as over 80 per cent of medical devices used in the country are imported from countries like China, US, etc. Another important area of focus is to have a predictable pricing policy for the medical device industry. This should follow with the proven and predictable pathway of trade margin rationalization as adopted successfully during the pandemic for certain medical devices. In its recommendation to the Union Budget 2023-24, the Medical Technology Association of India (MTaI), an association representing mainly research-based medical technology companies, said that in order to give the much required fillip to the industry, the Public Procurement Order (PPO) should be backed by empirical studies, labeling requirement under Legal Metrology (Packaged Commodities) Rules, 2011 and Quality Control (QC) Orders, which add redundant compliance burden to the medical technology industry, should be done away with. Some of the other key recommendations of MTaI to the Union Finance Ministry are regarding the ease of starting a business, the registration procedure, the regulatory regime, business credit availability, taxes and cross-border trade.

The research-based medical technology companies also said that there are still several improvement areas that need urgent resolution from the government. These are high taxes and tariff rates, which are the highest among all neighbouring countries. The public procurement policy also needs a relook, as in the current form it is very restrictive which is a big concern as more than 80 per cent of India's medical devices are imported. In India, medical devices or equipment are regulated by the Drugs Controller General of India (DCGI).

All medical devices are mandated to conform with ISO 13485 post September 30, 2021, which ensures that products and services are safe, reliable and of good quality. The medical technology industry also has to comply with Quality Control Orders (QCOs)/ Compulsory Registration Orders (CROs) issued by various ministries from time to time. However, these QCOs/CROs add to the compliance burden without any additional value addition to the already regulated medical devices. Furthermore, it affects local manufacturing, R&D, service and maintenance of installed medical devices in the country impacting their uptime for patient diagnosis and timely treatment. In this regard, the industry has recommended a broad exemption for regulated medical devices from additional QCOs/CROs.

In her Budget proposals for the financial year 2020-21, Finance Minister Nirmala Sitharaman had made a proposal of 5 per cent tax on imports of medical devices to fund the capacity building of healthcare delivery in public healthcare and to accelerate medical devices manufacturing in the country. During the financial year 2021-22 compared to the previous years, imports of medical devices have grown an alarming 41 percent as India imported medical devices worth Rs. 63,200 crore in 2021-22, up 41 per cent from Rs. 44,708 crore in 2020-21. China remained at the top of import source for India as medical device imports from China grew 48 per cent from Rs 9,112 crore in 2020-21 to Rs 13,538 crore in 2021-22.

Imports from the USA also increased steeply by 48 per cent to Rs 10,245 crore in 2021-22 from Rs 6,919 crore in 2020-21. The value of medical devices from China was nearly the same as the combined value of imports from Germany, Singapore and the Netherlands in 2021-22. The gravity of the situation can be gauged from the fact that the increase of import of medical devices has been five-fold over a six-year period as India imported Rs12,866 crore worth of medical devices in 2016-17. It is a fact that there have been several key measures taken by the government in the first half of the year such as reduction of redundant compliance burden, implementation of a predictable pricing policy, etc, which has boosted industry and investor confidence.

However, high costs continue to be the top issue for the medical device industry, which is already facing the brunt of inflationary challenges due to increased freight charges, limited supply of raw material, high import costs due to devaluation of the rupee against the dollar, etc. It is against this background, the research-based medical technology companies are asking the Union Finance Ministry to reduce the high customs duty and additional health cess levied on medical device imports to provide some leeway to the industry.

(The author is a freelance journalist with varied experience in different fields)