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The Union Budget 2006 received lukewarm response from the Indian drug industry. While a few positive indications have been spelt out like hiking the annual health spending and setting targets to eliminate leprosy and polio, the sector as a whole was left without much attention.

The Finance Minister slashed customs duty on about 10 anti-AIDS and oncology drugs from 15 per cent to 5 per cent. This is expected to make a few high-cost drugs in cancer therapy like Zometa of Novartis [Get Quote] more affordable to consumers.

A few other MNCs like Bristol Myers and Merck may also be able to make their drugs cheaper.

However, so far as broader measures like research boost and reduction of excise duty from 16 per cent to 8 per cent are concerned, the finance minister has not taken any encouraging steps. Critics point out that while the taxes are cut for idlis and dosas and also for aerated drinks and pastas, drugs could have been made more affordable.

Infact, the industry was hoping that the 150 per cent weighted average deduction for research establishments will be extended beyond 2007 upto 2017. Infact, though the FM has removed fringe benefit tax levied on medical samples, many are still not sure about its wider implications.

The industry had also asked for a reduction of duties on naphtha in order to get competitive on the global front.Though the FM has removed the duties for the plastic and polymer sector, the duty for the drug industry has not been cut.