SMEs need more sops to face tough biz environ

North India is playing a vital role in providing affordable, quality and efficacious medicines to the common masses of our nation.

Majority of the units situated in North India, particularly in Himachal and Uttarakhand are small and medium enterprises or SMEs. Although the SME segment is working hard to provide medicines to the nation, they are increasingly facing a tough business environment due to marketing and regulatory constraints, pressure from buyers with  regard to  high eligibility barriers and also from suppliers as SMEs are not able to  negotiate prices through bulk purchases resulting in high procurement costs.  SMEs are increasingly looking towards the Government for support for upgrading manufacturing technology, brand promotion and marketing to enhance domestic sales and exports.

In order to capture the huge business opportunity available for contract manufacturing, North India based SMEs need to have capabilities which comply with manufacturing standards like GMP set by the Indian Govt and the WHO. This requires liberal funding from the Govt along with other financial incentives.

Although the Govt of India has implemented financial assistance programmes like the Credit Linked Capital Subsidy Scheme for technology upgradation of SMEs to enable them  to comply with GMP standards with the revised Schedule M norms under the Drugs and Cosmetic Act, it was implemented long after the rules came into existence. Moreover there are a number of restrictive terms and conditions in the same scheme. Lack of support from select banks authorised by the Govt to issue the incentives has also affected the free flow of funds allotted under this scheme to SMEs.

However, we appreciate the Govt announcement of pharmceutical Technology Upgradation Assistance Scheme (PTUAS)that provides five per cent interest subsidy for SMEs to upgrade their facilities to WHO-GMP standards. Complying with these standards will help companies export their products to a large number of countries that have accepted the WHO standards for manufacturing and marketing medicines.

The introduction of tax free zones in HP and Uttarakhand was also a welcome move by the Govt. But to maintain the continuity in the growth of SMEs sector in these two states, the Govt should  come forward to extend the validity of the same incentives. Unfortunately, the Govt  has not acceded to our  request. Due to this , some of the companies who have came from different states  have started to  go  back. This has adversely affected these two states because when a company  suddenly wind up shop, it affects the economy,the employment scenario and many of the ancillary units of the pharma segment.

The  Govt has to come forward from time to time to extend Income Tax exemption,exemption from indirect taxes, capital gain tax and  simplify procedures for assessment and examination of their accounts.

Special economic zones
Though no Minimum Alternative Tax was charged earlier ,in the  budget 2011-12, the Govt announced levying of MAT at the rate of 18.5 per cent on profits for both SEZ developers and units, effective from April 2012.

Industry experts have criticized this proposal since  such a move would lead to either companies opting out or putting their projects on hold, impacting  the inflow of capital funds and investments and stifling exports from these zones.

Like in the case of Andhra Pradesh, Maharashtra and Gujarat, the govt should come forward with plans to set up similar zones in North India also. Due to the presence of  a number of  SEZs in the above three states , they have become most favoured destinations for companies planning to open new units.

SMEs have played a vital role in developing the Indian pharma industry, which today is amongst the top four emerging market players in the world and North India has become a hotspot to start pharma units. But unfortunately due to the fact we being  SMEs, our member units have to undergo a lot of difficulties in dealing  with a multitude of agencies and Govt Departments/ministries like Ministry of Health, Ministry of Chemicals, Dept of Pharma, NPPA, CDSCO, State Licensing Authorities, Dept of Labour, PF, Environment Dept, Dept of Biotechnology etc.

Therefore, particularly for SMEs , it is essential to have a centralised agency which should work like a single-window so that red tapism can be avoided because even  a small company has to face so many laws  such as  DPCO, The Drugs and Cosmetic Act, The Pharmacy Act, The Drugs and Magic Remedies Act, The Narcotic Drugs and Psychotropic Substances Act,The medicinal and Toilet Preparations Act and Good Clinical
Practices.

The  Government has been supportive of the life sciences industry and has undertaken several initiatives to promote development of innovative products and spur infrastructure development. Similarly it has to come forward with an open mind to develop the pharma industry also. SMEs should be given preference in Govt institutions and businesses. The clause of minimum turnover criteria should be abolished because once they get the drug licence ,they follow the Drugs and Cosmetic Act guidelines.

Rural segment
Rising purchasing power, increase accessibility to healthcare, a relatively high prevalence of ailments and better healthcare infrastructure is spurring growth of pharma consumption in rural areas.

The Govt  should come forward with  unique policies to help the rural areas through SMEs sector and not to encourage organised sector,MNCs and bigger companies who have now diverted their attention to rural areas. Govt should restrict rural market only to SMEs.

Finally the Government should also take steps to bridge the gap between big players and smaller ones. Otherwise the gap  will continue to widen with the large firms capturing all the growing opportunities, shrinking the base of the small scale sector.

It is high time that  the Govt  came forward with some concrete measures to help the  SME sector. Otherwise the prospects will be bleak for this shrinking sector as it  continue to grapple with multiple challenges and is still waiting for the Govt initiatives to save them.

Here it is worth recalling that organised companies like Zydus, Lupin, DRL, Cipla, Mankind, Aristo, Alkem etc who are now protecting the interest of the country were  once upon a time SMEs. If the Govt wants newer SMEs to emerge into organised companies, their needs and requirements should be considered sympathetically.