Chidambaram said it was found that collection of such duties on medicines had not been high due to their low price offer for assumption in excise duty.
Citing examples, the minister said a drug, which was priced Rs 148 has been shown an offer for assumption of a mere Rs 13.91 that led to erosion in excise earning.
Another drug which carried an MRP of Rs 210 was shown an offer of assumption of a mere Rs 25, he said adding with effect from January 8 this year, the government has prescribed levy of central excise duty on allopathic drugs on the basis of maximum retail price.
The minister said there has been no increase in the rate of excise duty on drugs and it continues to remain at 16 per cent ad-valorem.
He said the government has prescribed levy of central excise duty on the basis of maximum retail price to ensure certainty in assessment and to avoid valuation disputes for allopathic medicines.
He said there was increase in drug prices after the decision to impose excise duty on MRP.
Chidambaram clarified that ayurvedic, homeopathic, siddha, unani and biochemic drugs are outside the purview of retail price based levy.
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