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The Prime Minister's Office (PMO) has asked the Ministry of Finance to remove discrepancies between Active Pharmaceuticals Ingredients (API) policy and revenue board's orders.
The removal of such inconsistencies, insiders say, will help the sector grow.
The advice came after a push from the API industry insiders to the Prime Minister (PM) alleging non-implementation of the benefit as guaranteed in the policy.
The cabinet approved the policy in May last year.
They alleged that they have to count port demurrage and face hindrances at the time of export and import of the key pharmaceutical raw materials.
API industry insiders said prices of API often go up due to complexities over the issue posing a threat to its exports.
Bangladesh would not be able to exploit the World Trade Organisation's (WTO) opportunity for the relaxation from patent regulations, which would remain valid until 2027 unconditionally and until 2032 with some conditions.
Dr Mashiur Rahman, economic affairs adviser to the PM, sent a letter to finance minister AHM Mustafa Kamal about the issue.
Last week, the cabinet division asked the revenue board to keep it posted on this as soon as possible.
Last year, the commerce ministry published the 'National Active Pharmaceutical Ingredients (API) and Laboratory Reagents Production and Export Policy" offering some fiscal and other benefits.
Industry insiders said the majority of the benefits remained unimplemented during the last one year due to non-issuance of an order by the National Board of Revenue (NBR).
As per the policy, the API industries are entitled to enjoy exemption from the payment of income taxes, but the board did not issue any order in the last one year waiving the taxes, they said.
Although the VAT wing offered some benefits, it is not consistent with the policy, API industries said.
In an order, the VAT policy wing imposed a condition of value addition up to 60 per cent, triple the rate recommended in the policy.
In the policy, the VAT waiver has been given with a retrospective effect from fiscal year 2016-17.
Dr Mashiur Rahman has put forwarded three recommendations on the basis of lobbying from the API industry people, including expediting the implementation of the cabinet's decision on tax benefit.
The recommendations include the issuance of fresh Statutory Regulatory Order (SRO) by the VAT wing on an urgent basis, removing inconsistencies with API policy by amending existing SROs and devise an interim arrangement such as undertaking or bonded warehouse facility to speed up the release of raw materials from the port.
He also suggested the finance ministry keep expert chemist/bio-chemist or representative of Bangladesh API and Intermediaries Manufacturers Association (BAIMA) in the inspection committee of the NBR and set a specific timeframe for inspection.
In the letter, Dr Rahman said the NBR has formed an inspection committee without having API experts who will be able to assess the use of the raw materials and the quality of the pharmaceuticals ingredients.
Talking to the FE, S M Saifur Rahman, president of the BAIMA and managing director (MD) of Active Fine Chemicals Ltd, said there is a huge potential and demand for the pharmaceuticals raw materials but Bangladesh cannot make use of it.
"During the last four years, we've exported API over US$ 5.0 million to Egypt, Pakistan, Nepal, and Vietnam. In November, 2018, the API industries got export-orders worth $11 million," he said.
Egypt is purchasing anti-diabetic API products from Bangladesh, he said.
The global market of API is $200 billion, which is dominated by the China and India.
Due to the WTO policy, India and China have lost their access to the global market, thus leaving the scope for Bangladesh, he said.
According to the API policy, API and laboratory reagents manufacturers of the country will get corporate tax holiday until 2032 upon meeting some conditions.
The government has offered the benefits to encourage local production of API with a view to reducing the prices of medicines, boosting export while attracting $1.0 billion in additional foreign direct investment (FDI) in the sector.
Though the country's pharmaceutical industry has grown fast, it still depends on the imported API and laboratory reagents, mostly coming from China, Korea and India.
The policy has set the goal of reducing the import dependency on the raw materials to 80 per cent by 2032 from 97 per cent in 2016.
The API policy has set the target of achieving self-sufficiency in producing 370 important API molecules necessary for exports.