While the deadline for complying with Schedule M norms is just seven months away, most of the SSI drug manufacturers in Tamil Nadu who were complacent so far, have initiated modernization process to avert permanent closure after the deadline.
Thanks to the aggressive campaigning of the Tamil Nadu Pharmaceutical Manufacturers Association (PMA -TN), several units are in the process of modernization. Tamil Nadu has a large concentration of SSI units with over 750 to 800 formulation makers and another 400 to 500 in various segments. Out of this, only 20-odd SSI units had adhered to the Revised Schedule M norms, according to an official estimation last year by the Mashelkar committee. According to sources, at least 20 to 30 units in and around Chennai alone have initiated the process of complying with Schedule M.
According to T S Jaishankar, Chairman of the Confederation of Indian Pharmaceutical Industries (CIPI), and President of the Tamil Nadu Pharmaceutical Manufacturers Association (TNPMA), many units in the state are contemplating the idea of mergers and acquisitions as a resort to modernize and escape from downing the shutters forever. This is mainly because the units are unable to find much headway in modernization due to lack of own funds, inability to mobilize bank loans, liabilities, unfavourable market conditions etc. At least six to eight units in and around Chennai are in the process of merger, which Jaishankar terms as a 'strategic alliance'.
According to him, the objective of mergers is to leverage the strengths of units. "One unit may have a tableting section, but the packaging facilities may not be good. If he has a good friend having better packaging facilities and a weak tableting division, and both are in the same line of manufacturing, then it is not a bad idea to merge or acquire, provided both the entrepreneurs have good understanding between them," explains Jaishankar. In the recent issues of its official magazine - Pharmat, PMA has conveyed its members to consider the possible options, besides serious discussions on merger and acquisitions at the recent meetings, according to sources.
According to Jaishankar, CIPI has appointed a technical consultant on Schedule M for the Chennai region, and many units are in the process of availing his services. At least 20 to 30 units in and around Chennai alone have initiated the process of complying with Schedule M, according to sources.
A good percentage of the members feel that it virtually impossible for the units to modernize in accordance to the norms, especially in the unfavorable market conditions. The financial condition of many units is in bad position, and many units are finding it difficult to secure loans for modernization, especially with bank stipulations like three-year profit making track record. Though a few government agencies in the state and SIDBI offer loans, many units are finding it difficult to qualify the eligibility norms.
Technical stipulations like air handling system, documentation, requirement of space etc are some of the factors that worry the units. Sources note that it is practically impossible for units to add space to the manufacturing premises, especially in the case of units located in heart of cities like Chennai where real estate prices are very high. Otherwise, the option is to relocate the unit, where the manufacturer will have to set up a new unit itself.
Though the recent decision of the Central government to allow the state drug control authorities to decide on certain norms related to the Schedule M norms was a welcome move, it could lead to an official anarchy, fear sources. Change in government and other factors like the new Union Minister for Health and Family Welfare from Chennai could help the units from closing their shutters for ever, as the new authorities were likely to offer more attention to the grievances of the manufacturers, noted some PMA members.