Introduction:
The Indian biotechnology sector is at a crossroads, grappling with the ramifications of a recent and dramatic increase in customs duty for products falling under HSN code 98020000. This rise, from 10% to a staggering 150%, threatens to disrupt not only the biotechnology market but also essential research and diagnostic services critical to public health.

Understanding the Issue
The Union Budget 2024 introduced a substantial hike in customs duty, impacting nearly 60% of the products we import in the biotechnology sector. This includes crucial research reagents and diagnostic kits, many of which are vital for public-funded research institutes and diagnostic laboratories. These institutions, which play a pivotal role in advancing scientific research and providing essential healthcare services, are now facing severe challenges due to this policy change.

The Ripple Effect

1. Impact on Research and Diagnostic Institutions
Public-funded research institutes and diagnostic labs are essential to scientific advancement and public health. These institutions often procure biotechnology products through the Government e-Marketplace (GEM) portal, which does not accommodate foreign suppliers quoting in INR inclusive of GST. Additionally, many of these institutes rely on distributors for credit support, a service made increasingly difficult under the new duty structure. The increased costs are likely to reduce the availability of essential research reagents and diagnostic kits, hampering ongoing projects and crucial diagnostic work.

2. Financial Strain on Distributors
As local distributors, we provide vital support to these institutions by offering credit and managing logistics. The recent duty increase places an immense financial burden on us. Even with the government’s General Resolution (GR) indicating that a 10% duty applies to research products, the financial strain remains severe due to the delay in refunds and the sheer scale of the duty increase. This situation risks disrupting our operations and, by extension, the supply chain that supports critical research and diagnostic services.

3. Rising Costs for Diagnostic Services
For diagnostic labs, particularly those involved in cancer diagnosis, the new customs duties mean significantly higher costs for diagnostic kits. Tests that once cost around INR 10,000 could now rise to INR 25,000, making essential diagnostic services less accessible to the general public. This increase in costs could have far-reaching implications for patient care, particularly for those from economically disadvantaged backgrounds.

4. Threat to the Biotech Ecosystem
The increase in customs duties threatens to undermine the entire biotech ecosystem. Small and medium enterprises (SMEs) in the biotech sector, already operating on thin margins, face the risk of closure. This disruption not only affects businesses but also jeopardizes jobs and the overall growth of the biotech sector, contradicting the government’s efforts to support biotech startups and innovation.

A Call for Action
In light of these challenges, we urge the government to take the following steps:

• Reevaluate the Customs Duty Increase: We request a reconsideration of the drastic duty hike or a clearer implementation of the GR provisions to support distributors effectively.
• Facilitate Policy AdjustmentsAmendments to the GEM portal and policies to better accommodate foreign suppliers and support the procurement process for public-funded institutions are needed.
• Support for the Biotech Sector: Consider measures to mitigate the adverse effects on MSMEs and ensure that critical research and diagnostic services remain accessible and affordable.

The recent customs duty hike presents a complex challenge for India’s biotechnology sector. While policies are essential for revenue generation, they must be balanced with the practical needs of businesses and the critical services they provide. We hope to work collaboratively with the government to address these issues and find a solution that supports both innovation and public health.

As stakeholders in this vital sector, we are committed to advocating for a balanced approach that fosters growth and ensures the continued delivery of essential research and diagnostic services. Your support and action are crucial in navigating this storm and safeguarding the future of India’s biotechnology sector.