Hyderabad: Nearly two years after the Union government brought in rules meant to boost standards at the thousands of drug manufacturing units in India, several small and medium-sized companies in the sector say they are beginning to wilt under financial pressure that the mandated requirements entail.
About a 10th of the nearly 7,500 such small units have either closed down or have had their licences withdrawn since the July 2005 rule change that made it compulsory for all drug makers to follow what are called ‘good manufacturing practices’ (GMP), according to an industry association. The small and medium pharma sector accounts for over Rs7,000 crore worth of production, accounting for over 20% of the drugs made in India.
To become GMP-compliant, drug making units have to set up purification and other GMP systems that can cost up to Rs2 crore, says S.V. Veerramani, chairman of the small and medium enterprises committee, Indian Drug Manufacturers Association. “Air-handling systems alone need Rs80 lakh investment.”
Lalit Kumar Jain, a pharmaceuticals entrepreneur from New Delhi, points out that small-scale units that are not GMP-certified are not able to take part in government tenders. Several units, based in Haryana and Uttar Pradesh, have been forced to shift to excise-free zones to set off increased costs, he said.
Four states—Himachal Pradesh, Uttarakhand, Jammu and Kashmir, and Sikkim—have waived excise duties as an incentive to attract manufacturing investments.
Elsewhere, Nitin Shah, Mumbai-based proprietor of Sherley Chemicals, a manufacturer of liquid oral medication, faced closure in January 2006 when he was asked to expand the factory’s production area and additional space was not available. He further needed to invest Rs40 lakh into the unit to comply with GMP rules, which he could not afford, he says.
Shah closed the Mumbai unit, which was operating since 1969, and instead outsources production. “We have tied up with a contract manufacturer to get four-five products manufactured at present,” he said.
The industry also blames government delays for the closure of small units. When the GMP rules were conceived, they were to be introduced together with financial support from the government.
The draft National Pharmaceuticals Policy 2006, which is being deliberated by a group of cabinet ministers in New Delhi, proposed that a dedicated fund would be created to provide for subsidy on borrowings to small-scale and medium pharmaceutical units going in for GMP implementation.
But this has been slow to take effect.
“We had asked the Planning Commission for Rs112 crore yearly for the next five years (as part of the 11th Plan), but we have received just a token sum of Rs15 crore this year. We will advertise and begin disbursing the sum that we have to begin with soon,” a senior official of the ministry of chemicals and fertilizers said.
Bhuma Shrivastava in New Delhi contributed to this story.