Soon after the Himachal elections, the Department of Central Excise issued a notification that the excise exemption does not apply to non-manufacturing units in these states.

"The units into packaging were earlier allowed excise exemption as any value addition, by the excise department's own definition, was a part of manufacturing. Now, after this notification, such units, which are not more than 3 to 4 per cent in Himachal, will not be able to claim exemption. But it would not impact the majority of industries here," says Rajendra Guleria, chairman of Himachal CII, who sees it as a move to "please other states".

But neighbouring Punjab, especially its pharma industry, sees it as the beginning of an end to "discrimination" that has almost ruined them. "There was a flight of industry to tax-exempt states after January 2005, when maximum retail price (MRP)-based excise exemption was introduced. This anomaly has led to these states producing medicines, which, according to a report prepared by NIPER, are almost 326 per cent steeply priced than those produced in non-tax exempt states. They are also sub-standard and spurious. Why is a policy being allowed to play havoc with the lives of crores of poor patients at the behest of the powerful pharma lobby," says Jagdeep Singh, president of Punjab Pharma Industry Association.

"Besides, the country is moving towards goods and services tax (GST) regime, which will most likely be put in place in the 2010 budget. All these excise exemptions will lose their relevance then," he adds.