Even as the Indian pharma industry is making its mark in more markets the world over as a leading generic supplier, the North India in general and Delhi in particular is slowly losing its sheen as a hot destination for manufacturers.
With the small players withering away steadily and big pharma players shifting their main offices, till-now hot destinations like Baddi and Uttaranchal reaching saturation points, the once-prominent pharma hub may soon turn out to be a less happening place. Things may get better only if the Government infuses some life-saving doses for the survival of industry in this part of the country.
A look at the latest statistics about the 10000 plus manufacturers compiled by National Pharmaceutical Pricing Authority will tell whole story. Whereas Maharashtra is the home to as many as 3139 formulation and bulk drug units, Delhi can boast of just 540 units. Think Delhi has been one of the pioneering spots for the Indian pharma industry to take roots in the early days and during its peak time, the national capital region including Noida, Gurgaon, Ghaziabad and Faridabad had over 2000 units, if the industry leaders are to be believed.
Gujarat is growing strong with 1526 units and Andhra Pradesh has 727 companies while West Bengal has 756 units. Even Tamil Nadu has 570 firms. And interestingly, the South in general and TN in particular may soon become an attractive destination for pharma ventures due to the efforts of the current Chemicals Minister. While Delhi accounts for just 5.1 per cent in the total business in the country, Maharashtra dominates with 29 per cent share. Gujarat is contributing about 14 per cent of the business while AP has a share of 6.9 per cent. Haryana, another prominent destination till some time back, has 315 units while Punjab and Jammu Kashmir have very few units. The only saving grace is the rise of Himachal Pradesh which has officially 368 units and Uttaranchal with nearly 200 units in the recent past.
The major pharmaceutical units in the region are Ranbaxy, Panacea Biotec, Venus Remedies, Ind-Swift, Ind-Swift Laboratories, Surya Pharma, Dabur Pharma, Jubilant Organosys, Nectar Lifesciences, IOL Chemicals and Pharma. Over the years, unlike Gujarat or Maharashtra, the region has not witnessed the rise of any new player to reckon with, other than Mankind Pharma.
"In 1970 and 80s, Delhi and outskirts were the leading hubs for the pharmaceutical industry, mostly led by small scale and medium players. Then slowly biggies emerged and captured the grounds while some existing units diversified. Though the inland container depots helped the small players also to grow for some time, struggle continued for them as big players captured the markets fast. Even in the small scale sector, formulation segment has come up better while the bulk drug manufacturing is yet to reach the full potential," according to SPIC vice chairman Lalit Kumar Jain.
SME sector
The story has been the same for the small scale sector across the country with North being no exception. Schedule M compulsions, less friendly pollution norms, less sops from the government and competition from the biggies have pushed the small players to the wall. But for the tax free havens, the story would have been worse for North Indian units.
"Thousands of small units have either shut down their operations or are facing closure throughout the country. There are only a handful left outside the excise free zones in the North India which are at present fighting for survival. Almost 75 per cent of the small scale units have moved to comparatively safer havens or excise free zones. Of the 300 units in Haryana, now only 50 to 60 are left. In Delhi, there could be just 30 to 40 working now. So is the case with Punjab where once there were 500 units and now hardly 50 remaining.
Majority of them have moved to free zones while others are faced with the logical end of their struggle-premature deaths," according to an expert from the SME industry.
The government of India has yet to put into place Pharmaceutical Technical Upgradation Fund (PTUF) and in light of this, provision of schedule M implementation should be given more breathing time, according to the small scale players. ``The best thing that can happen at this critical juncture is some kind of relief package with tax sops and more financial assistance, if the small scale sector in the North zone has to tide over the current crisis'', they said.
Big players
The large-scale manufacturers in the region, though only a handful, continue to consolidate their grounds. The takeover of the flag-bearer of the region, Ranbaxy by the Japanese Daiichi Sankyo, had triggered a series of mergers in the country last year. It also witnessed a change of guard with its CEO Malvinder Singh stepping down. The consolidation process which began with these mergers and takeovers continued to gain momentum in the last year.
However, even the big players seem to be uninterested in keeping their base in the national capital. Ranbaxy is planning to shift their marketing and administrative teams to Mumbai. But its headquarters and R & D centre would continue in Gurgaon. It is to be seen whether more Delhi-based companies would follow the suit.
At the same time, all the biggies continue to keep North India as their backyard for manufacturing facilities. Ranbaxy is going to build a new drug manufacturing facility in Baddi. The new facility, meant to augment Ranbaxy's production capacity to serve domestic business, is likely to come up before March 2010. This is the first new manufacturing project since Japan's Daiichi Sankyo became its major shareholder last year. The estimated cost of the project is expected to be around Rs 40 crore. While the Baddi project is to augment domestic supplies, Ranbaxy's Mohali pharma SEZ project, also in the process of execution, is meant for exports. Ranbaxy's domestic drug manufacturing facilities are located at Dewas (Madhya Pradesh), Paonta Sahib (Himachal Pradesh), New Delhi, Jejuri (Maharashtra), Goa, Mohali and Toansa (Punjab).
Excise-free zones
Himachal Pradesh and Uttarkhand had witnessed influx of hundreds of pharma companies from different parts of the country, including far away states like Tamil Nadu and Maharashtra after the central government announced Himachal Pradesh, Uttarakhand, J&K and Sikkim as excise free destinations to give a fillip to the industries in 2002. Though there were not much takers for the scheme in the initial years, the migration to tax free zones picked up momentum when the central government introduced MRP-based excise in the country in 2005.
However, with the fast approaching deadline of March 2010 and uncertainty of its extension, and the excise free zones having reached saturation, activities are very little in these regions now. ``It is not sure whether the government will extend the existing tax sops beyond the deadline. There is not much time left for the entrepreneurs to set up new units. It takes minimum two years to turn the ventures into full swing and so no new investors are coming to the region as of now,'' according to a spokesman of the Federation of Pharma Entrepreneurs which represents the interests of about 500 units spread in the two regions.
Haridwar, Roorkee, Dehradun and Rudrapur are the main hubs of pharmaceutical firms in Uttarakhand having around 200 units while Baddi and some other pockets in Himachal has over 300 units. Alembic, Dr. Reddy Lab, Alkem, Mankind, Torrent, Lupin, Cadila, Indswift Lab, Unichem, Morepen, Klitch, Ranbaxy, Nector, Surya, Cachet, Indchemie, Galpha are some of the major companies who have set up their units there. About 100 companies including many biggies have invested about Rs 3000 crore in the recent years. The industry has given job to 20,000 in the past.
The gold rush which was witnessed in these regions can happen again only if the Central Government extend the tax holidays for these hilly states. And clarity should be there in policies so that rumours do not shake the confidence of the investors, say observers
Mankind Pharma, a rare success story
One of the rare success stories which the North region can boast of during the recent years may be of Mankind Pharma. Established in 1995 with a capital of Rs 50 lakhs, Mankind at present is a leading pharmaceutical company of India. Mankind has out-performed the industry by growing at the rate of 60 per cent year after year. It is among the top five fastest growing pharma companies of India as per ORG-IMS. The company achieved a turnover of Rs.920 crore in the fiscal year 2008-09.
A fully integrated pharmaceutical company having pan India presence with a comprehensive network of 52 C&F agents and 6000 stockists, it is ranked fourth in India and third in North India as per ORG-IMS, Prescription Audit, 2008. As per ORG-IMS Prescription/Doctor/Month audit of January 2009, it is ranked first in India. ``Strong portfolio of businesses, geographies and products provide us the strategic benefits of integration that allow us to perform best in an increasingly competitive market. We have a strong market presence in antibiotics, antifungals, gastrointestinals, NSAIDs, anthelmintics, cardiovascular, dermal and erectile dysfunction categories. Our products are at top five positions as per ORG-IMS,'' according to a company spokesman.