The Indian pharmaceutical industry has asked Finance Minister P Chidambaram to raise the tax deduction on R&D activities to 200 per cent of the amount spent, as the industry tries to come to terms with the product patents regime and be globally competitive.

In its representation to Finance Ministry, industry chamber Indian Pharmaceutical Alliance asserted that incentives in research and development are required to boost the credentials of the sector from being a mere supplier of generic medicines to a research driven industry.

"The face of Indian pharmaceutical industry needs to change if it has to survive and grow and that growth has to come not merely by being a supplier of generic (off-patent) products, but also from new patented products developed through R&D efforts," IPA Director General D G Shah told PTI.

The current sops allow pharma firms to set-off 1.5 times or 150 per cent of the money spent on R&D. The pharmaceutical industry has now asked Chidambaram to consider increasing this deduction to 200 per cent.

These deductions, however, are only available to drug manufacturing companies and not to standalone R&D firms. Many Indian drug makers, including Dr Reddy's Lab, Ranbaxy [Get Quote], Nicholas Piramal [Get Quote] and Sun Pharma [Get Quote], had recently decided to spin off R&D units to unlock real value for their shareholders.

"The current provisions for deduction are restrictive in nature and cover only expenditure incidental to R&D carried on at the in-house facility. It is therefore suggested that its scope be widened, so as to also encompass within its fold all expenditure incidental to basic research carried on at any outside R&D facility, whether in India or overseas." Ranbaxy said in its representation.