This allows private hospitals to raise cheaper long-term capital, and has long been awaited by the industry.

Finance minister Jaswant Singh also reduced the import duty on medical equipment from 25 per cent to five per cent.

Also, he raised the depreciation limit on such equipment to 40 per cent from 25 per cent, to encourage hospitals to import medical equipment.

This will allow more hospitals to offer critical care services, which in turn is expected to lower the cost of treatment of patients suffering from life threatening ailments.

M L Bhakta, president of the Association of Hospitals, an association of 37 leading hospitals in Mumbai, said, “This is the first time the role of the private players and not-for-profit players has been recognised. Over time, it will result in more private sector investments in healthcare and will lead to a fall in treatment costs for patients.”

Also, income tax exemptions for pharmaceutical companies will now be on par with those of IT companies. Further, the export obligations of Rs 20 crore (Rs 200 million) that biotech and pharmaceutical companies were subject to for availing of customs duty exemption has been dropped.

Said J B Mody, chairman & managing director, JB Chemicals & Pharmaceuticals, “It is heartening that 10A and 10B for pharmaceuticals and IT industries, which are both knowledge based, will continue. Pharma exports will grow substantially in the coming year as a result. The industry will see much faster growth, over 15 per cent, due to the general health insurance scheme and hospital schemes and encouragement to exports.”

To encourage clinical trials in the country, the Budget has reduced the customs duty on drugs imported for clinical trials from 25 per cent to just 5 per cent.

However, while Finance Minister Jaswant Singh has extended the tax holiday to R&D based companies, he has not announced tax exemptions for R&D income like royalties, as the industry had expected.