The general euphoria over the budget, however, comes laced with overall apprehension of its impact on drug prices. Top of the mind calculations by key industry personnel and indications that zero duty benefits would no longer apply to life-saving drugs, suggest that drug firms may be forced to pass on any increase in prices (of at least controlled drugs) to consumers.Though finance minister Yashwant Sinha's proposal to permit up to 74 per cent equity participation via the automatic FDI approval route has been termed as "extremely positive", industry experts suggest that "cost factors" would restrict its attractiveness mainly to newentrants.

Says Vision Consulting Group chief executive officer and former Pfizer commercial director Dilip G Shah, "I don't see existing companies gaining much from the proposal, given that it would entail disproportionately huge investments to increase equity holding from say 40 per cent to 74%, at market prices. But the proposal would certainly be attractive for possible new entrants like Bristol Myers Squibb, Merck and other smaller companies from Korea, Japan, Europe".

Speculation has been rife that multinationals like Pfizer, Parke-Davis and SmithKline Beecham, have already got the ball rolling to hike their stake in their Indian affiliates. Indian Drug Manufacturers' Association (IDMA) president Gopakumar G Nair, however, expressed fears over possible diversion of investment into non-priority areas and restructuring of businesses. A section of analysts also expressed concern over possibilities of increased "transfer of funds" abroad, due to increased foreign equity participation.On the R&D front,the key sop offered to industry has been the extension of the facility for availment of the 125 per cent weighted tax deduction for research and development to March 31, 2005.

Organisation of Pharmaceutical Producers of India (OPPI) vice-chairman (pricing & taxation) Keval Handa said, "This is the first time that the government has looked at the pharmaceutical industry as a knowledge-based industry and not merely manufacturers of tablets and capsules. They have also realised the need to do away with regulations and focus on development". Lupin Laboratories chairman Desh Bandhu Gupta said, "This weighted deduction is applicable to captive as well as sponsored R&D efforts. The extension of the period of benefit is a positive step, given the impending patent regime". Sun Pharmaceutical Industries official spokesperson said since most drug firms were in the process of getting their R&D act together, the extension of the weighted deduction is a major positive for the industry.