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Special zones for making bulk drugs fail to take off

LiveMint logoLiveMint 03-08-2017 Asit Ranjan Mishra

The government’s effort to develop specified zones to boost domestic manufacturing of drug ingredients which are now imported mostly from China has failed to take off as the domestic pharma firms have told the government that they cannot match China’s price.

Bulk drugs or active pharmaceutical ingredients (APIs) are raw materials used in a drug that give it therapeutic effect.

“The effort by the government couldn’t also make headway as pharmaceutical companies sought corporate tax breaks and cheaper electricity connectivity. Private companies asked the government-owned Indian Drugs and Pharmaceuticals Ltd (IDPL) to take the lead in producing APIs, but it was also not keen,” a government official said on condition of anonymity.

In April 2016, commerce and industry minister Nirmala Sitharaman had taken the initiative to set up specified pharmaceutical zones where API manufacturers set up units. She also held meetings with environment minister Prakash Javadekar, and chemicals and fertilizers minister Ananth Kumar to resolve issues faced by API manufacturers.

India imports 60-70% of its APIs from China for more than 10 types of drugs, some of which are crucial drugs such as antibiotics and anti-diabetic medicines. The government had set up a committee of secretaries, headed by then former secretary V.M. Katoch to suggest ways to reduce dependence on bulk drug imports from China.

In its report submitted in February 2015, the Katoch committee recommended establishing six large API clusters in five-six states by formulating a scheme similar to modified special incentive package for IT hardware industry, tax-free status for 15 years for such pharma units and loans at a subsidised rate, among others.

It also recommended the mega parks for APIs should have common facilities managed by a special purpose vehicle, such as common effluent treatment plants (ETPs), testing facilities, captive power plants/assured power supply by state systems, common utilities/services such as storage, testing laboratories, IPR management and designing among others.

“No final view has been taken about implementation of Katoch Committee recommendations yet,” minister of state for chemicals and fertilisers Mansukh L. Mandaviya said in a written reply to the Lok Sabha on 7 February.

D.G. Shah, secretary general of industry lobby group Indian Pharmaceutical Alliance, said beyond fiscal incentives, the government also needs to have a commercially viable proposition to encourage investment in the sector. “Why the private sector is not keen to invest in manufacturing APIs is that they know once they do so, China will bring down the prices to such a level that their business will be completely unviable. Earlier also, China did the same and forced shutting down of four such units and government did nothing about it,” Shah said.

Shah said over-dependence on China especially for antibiotic APIs poses a serious risk to Indian health sector. “There seems to be no clarity or urgency shown by the government on the issue. If China at any point of time stops or reduces supply of such bulk drugs, India will be badly hit,” he cautioned.

Bulk drug imports from China dropped to Rs 9,121 crore in 2016-17 from 13,853 crore a year ago, following the government’s withdrawal of customs duty exemption on certain categories, minister Mandaviya had told the Parliament in March.

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