Two and a half years ago, Baddi and its surrounding villages in Solan district of Himachal Pradesh were just another backward area of the country with hardly any industrial activity. Today, this region has been transformed into perhaps the most significant pharmaceutical production centre in India. Nearly 50 per cent of the country's pharmaceutical production is set to come from 120 large, medium and small scale companies located here in the next six months. The state industries department has issued a total of 320 provisional registration for setting up pharmaceutical units so far. The major pharmaceutical companies, Ranbaxy, Dr. Reddy's, Cipla, Alembic, Zydus Cadila, Torrent, Wockhardt, Unichem, Alkem, Nicholas Piramal, Glenmark, Dabur, GSK and Johnson & Johnson are already in operation with one or more of their formulation units. Among the medium and small scale units, over 50 are in production and another 50 are in various stages of commissioning their plants in the next few months. A notable feature of the pharmaceutical production here is that the companies are shifting most of their high value products into the zone to take the maximum advantage of excise and income tax benefits. The Central government notified a ten years excise and income tax holiday for Himachal towards the end of 2003 to help industrialization of this backward state. Not many units came into the zone in early months of 2004. But the rush of drug units especially from Gujarat, Punjab and Delhi to the region in 2004-05 was incredible. Neither the Central nor state government could foresee such massive shift in drug production to this state and its consequences. There are, of course, a few units put up by the local entrepreneurs too. What is clearly visible in Baddi region is a state of unpreparedness of the state government in accommodating such large number of pharmaceutical units. Roads inside and outside are bad, quality of power is poor and there is no drainage system. The state government seems to have woken up now and trying to provide these basic facilities in its own pace. But, the worst problem confronting the units is the non-availability of qualified and skilled manpower in the state. The state government's stipulation reserving 70 per cent of jobs in all categories of employment for locals has put most of the units in a tight spot. As the state does not have even one pharmacy college offering B.Pharm degree, the units have to depend on other states for their requirements. Same is the case with the availability of skilled and semi skilled staff in Baddi. Then, how the pharmaceutical units are running their plants with 70 per cent locals is a mystery. The standard practice, therefore, is poaching on each other's staff but that only benefits the workmen. Another intrigue is the skeletal drug administration of the state with just 4 drug inspectors and a Drug Controller for 100 odd pharmaceutical units and thousands of retail outlets. And the Baddi units are happy as the officials are 'quite cooperative' and less demanding. A prospects Himachal government seems to have not visualized is the doubtful sustainability of Baddi's growth. Once the excise and income tax concessions are withdrawn, many units are likely to flee back from where they came. Care needs to be taken, therefore, that such swings should not destabilize the state economy.