Despite the price hike in raw material and packaging material, which has adversely affected the national pharmaceutical industry as a whole, the Gujarat pharmaceutical industry is marking a high growth rate, thanks to the excise duty reduction in the 2008-2009 Union budget.

The excise duty reduction from 16 per cent to 8 per cent in the last budget has come as a boon to the state industry, which was in hues and cries on the upper hand of the nearby tax haven states. While the previous few years has recorded a huge exodus of pharmaceutical players from the state to the tax exempted states like Uttaranchal and Himachal Pradesh, the current trend points to the returning of many of these players to Gujarat due to the excise duty cut, according to industry sources.

"In the last few months, many of the companies which have set their operations in tax exempted states are closing down their units in these regions and are increasing their operations in the state. This is clearly a positive sign for the Gujarat pharmaceutical industry," said Dr R S Joshi, executive secretary, Gujarat Sate Board, Indian Drug Manufacturers' Association (IDMA). He said that the contribution of the state industry to the national pharmaceutical production, which came down from 40 per cent to 28 per cent last year, has experienced a catapult to 42 to 45 per cent in the last one year.

Apart from the excise duty reduction, poor infrastructure facilities in tax haven states have also played a role for pharmaceutical industry in states like Gujarat and Maharashtra. Further, the tax soaps allowed for these states are expected to find the deadline in 2010. The pharma companies, which were in a rush to the northern states, are now coming back to their previous strongholds, states like Gujarat and Maharashtra, he added.

Interestingly, the set back faced by the state industry due to the exodus has resulted in increase in exports from Gujarat. Several of the companies in the state have entered into exports business in the last few years to overcome the set back in the domestic industry faced by the increase in production from the northern states. In the state, where 80 per cent of the companies out of 3200 licensed units are under small and medium entrepreneurs (SMEs), many of the small players have started exports operations of late, according to the sources.

Pursuing its efforts to bring more SME players into export operations, the IDMA will soon conduct workshops for company officials in exports and good manufacturing practices (GMP) guidelines of World Health Organisation (WHO). The association has conducted the similar exports training course last year, which was attended by more than 400 industry representatives in the state. The workshop has enabled entry of more SME companies into exports sector last year, commented Joshi.

"However, the major problem faced by the Gujarat pharma industry is, as in the case of the nationwide pharma industry, the increase in the price of raw materials and packaging materials. In the country, where the pharmaceutical prices are controlled by the government strictly, the huge increase in production may affect the industry and we are currently concerned about this issue mainly," said Joshi.

The SME players in the state are in a stage of panic though the National Pharmaceutical Pricing Authority (NPPA) has informed the companies that the authority will consider the applications of individual companies for price increase to manage the production cost. The small scale players fear that though the government's measure would support the major players, a majority of SME units may not be able to approach the national authority individually.

Apart, the industry sources reveals that the recent administrative reform by the state Food and Drug Control Administration (FDCA) seeking affidavit on Rs 20 stamp paper with each additional product permission application from the pharma players has put the SME players into a fix. According to the sources, the FDCA has introduced the norm demanding the companies to file an affidavit for every additional product permission applications, without informing the industry players.