A proposal to boost India’s bulk drug production by shifting a sizeable part of the manufacturing capacity to Uzbekistan has hit a wall as the initiative has not gone down well with the domestic industry. The Central Asian country’s offer to provide a slew of incentives for setting up Indian bulk drug parks there was taken up by the Central government and Minister of State for Chemicals and Fertilisers Mansukh Mandaviya last week held a meeting with top bulk drug manufactures to discuss it.
According to domestic manufacturers who are disappointed with the initiative, the government is considering a counter-productive offer when a few well-thought-out regulatory changes and tax incentives are enough to boost the domestic manufacturing sector. The government’s readiness to embrace the Uzbek offer will have to serious long-term implications as increased dependence on import of bulk drugs or active pharmaceutical ingredients (APIs) from China is currently raising national security concerns, they say.
Currently, India imports over 60 per cent of its bulk drug requirement from China and the government has been looking for ways to promote the domestic industry-- comprising around 1,150 units producing 350 APIs -- to reduce dependence on the neighbouring country. The Uzbek government has entered the scene at this juncture with a tempting investment proposal. In exchange for Indian technical expertise, the former Soviet republic is offering incentives including free land, 10-year tax holiday, faster environmental clearances and subsidised power and water. According to official sources, the government is in favour of the proposal and keen on shifting up to 200 units to Uzbekistan in the initial phase.
“But the whole idea doesn’t make sense. We oppose this initiative as it would eventually backfire on the domestic industry. What we need is a conducive regulatory environment. The government should wake up and grasp the realities on the ground,” Indian Drug Manufacturers Association’s bulk drugs committee chairman Yogin Majmudar told Pharmabiz.
And Uzbeks are not alone in their bid to woo investors and develop API industry. Bangladesh has also come out with a slew of measures to boost the sector. As per the proposal, Dhaka will give unconditional tax holiday to all API and laboratory reagent producers, both local and joint ventures, until fiscal 2021-22. If a producer can manufacture at least five molecules every year it would get 100 per cent tax holiday from fiscal 2021-22 to 2032. Firms that can produce at least three molecules will be entitled to a 75 per cent tax holiday. Waiver on advance income tax and tax deduction at source are also offered.
“These are the initiatives we lack here. Uzbeks are offering quicker environmental clearances, tax breaks and subsidised power. These incentives were on the top of our demand list for a long time. If they clear these hurdles, we don’t need to shift our units to Uzbekistan to develop API industry,” Majmudar opined, adding that many Indian investors would soon be tempted to capitalise on the desirable investment climate in Bangaldesh.
Despite producing a fifth of the world’s generic drugs, India imported APIs worth Rs.11,635 crore during the last fiscal. Bulk drugs worth Rs.13,853 crore were purchased from China in 2015-16 or 65.3 per cent of the Rs.21,217 crore total APIs consumed in the country. These included ingredients for essential antibiotics. The rest came from Europe, Japan and the US.
Industry representatives have criticised anomalies in the Indian regulatory mechanism. The existing rules don’t allow an Indian manufacturer to go for capacity expansion or diversification to meet market demand without prior consent from pollution control boards (PCBs) even if there is no change in pollution load. The approval can take up to six months to arrive.
“The firms should be allowed to make changes in product mix and increase capacity if there is no change in pollution load after intimating the PCB concerned instead of waiting for their green signal. Moreover, as per existing norms, individual units which are connected to central effluent treatment plants (CETPs) are required to treat their effluent to the same level as mandatorily required by the CETP. This is double effort and leads to steep rise in capital expenditure,” an API manufacturing company executive said.
Recently, the government has constituted a high-level task force to formulate a roadmap for reviving the API sector. The group is expected to study global manufacturing practices, interact with relevant stakeholders and create a roadmap with implementable recommendations. “The plan looks good on paper, but a task force is not going to resolve issues in this sector. What we need is concrete and tangible steps, not strategic teams,” Majmudar, who is also a member of the task force, added.
While China regularly tweaks its regulations to give a fillip to its industry, India is way behind in this area. Registration and inspection fee for pharma product exporters to India remains extremely low. Inspection of API units is also not mandatory. On the other hand, Beijing charges hefty registration fee and takes more than 2 years to grant permission. Not surprisingly, over the years, China has captured a 40 per cent share in the global API market. If proper and regular inspections are conducted, many Chinese bulk drug exporters will be out of the game, industry sources say.