North India, which holds a large number of pharmaceutical manufacturing units and which once was looked up as a most promising zone that groomed budding industries a decade ago, is now fast losing its charm.

Manufacturers who had set up units attracted by the incentives and encouraged by tax exemptions in the northern free zone of Baddi in Himachal Pradesh are now facing various problems. Major among them is lack of auxiliary facilities to support the industry. Particularly the SMEs which are low capital intensive are now facing the problem of non-availability of loans. Moreover after the tax exemption period is over, they are incurring losses and looking to shift their bases to greener pastures in the northeastern region, where the central government has recently notified free zone areas for new investors.

According to statistics from Department of pharmaceuticals there were about 10563 pharmaceutical manufacturers in the country in the year 2010-11. Of these majority of 36.4 per cent manufacturers are concentrated in the Northern India while Maharashtra and Gujarat in the west and West Bengal and northeastern states stand are occupying the second and third places respectively. Andhra Pradesh and Tamil Nadu are dominant in the south.

But as far as the quantum of production is concerned, Maharashtra, Gujarat and Andhra Pradesh are leading. Despite having a number of manufacturers , the North has always been lagging in terms of volumes. The situation is mainly attributed to various factors. “Apart from lack of suitable infrastructure facilities, the free zone in the northern India is burdened with lack of technology up-gradation. Moreover the loan-licensing is also getting less attractive,” opined S.V. Krishna Prasad, Cito Healthcare Pvt Ltd, Hyderabad.

The latest strictures against some of the North Indian pharma outfits by the USFDA are points to ponder, he adds. In view of more USFDA investigations, the Indian pharma sector, particularly the northern players should strictly abide by quality and compliance, which is the need of the hour. There cannot be any alternative to the quality and compliance that is called for across the industry, be it Ranbaxy, Wockhardt or any one. To keep everything in line, regular interaction with the regulatory agency is a much needed step to move forward and clearing the hurdles, opines Prasad.

Key players in North
Some of the key pharma players are Ranbaxy, Panacea Biotec, Venus Remedies, Ind-Swift Laboratories, Dabur Pharma, Jubilant Organosys, Nectar Lifesciences, IOL Chemicals and Pharma. However, except for a few small organizations, the northern part of the country is yet to witness the growth as in Ahmadabad or Mumbai.

Ranbaxy in the north has been always the flag bearer, but the year 2013 has been particularly difficult for them as their multiple locations have been under the US regulator’s lens apart from its major stake buyer Diachi Sankyo. Whatever happens, the outcome should strengthen the need for quality, compliance in every aspect of the pharma industry. Panacea Biotec has its share of regulatory strictures and is trying to comply.

Venus Remedies has been stepping up its operations and regulatory compliances and this is one organization looking to grow in its tracks. Surya Pharma has run into difficulties and what the future holds is yet to be clear.

Likewise, the companies like Ind-Swift Laboratories, Dabur Pharma, Jubilant Organosys, Nectar Lifesciences, IOL Chemicals and Pharma have a stronger bottom line, compared to the crisis-hit SME players. More importantly, these companies hope to share the growth story of Indian pharmaceutical industry in the future.

North V/s south
Out of more than 10,000 manufacturers in the country, Maharashtra has 3200 formulation and bulk drug units, Delhi has 600 units. While initially the NCR including Noida, Gurgaon, Ghaziabad and Faridabad had over 2000 units, Gujarat is growing strong with 2500 units and Andhra Pradesh has 1000 companies while West Bengal has 800 units. Tamil Nadu is moving ahead with 600 firms and is growing.

In view of certain state bifurcation issues, Andhra Pradesh might find the growth affected as the units largely in and around Hyderabad (excepting Visakhapatnam) would look for relocation possibly near to the new capital if the bifurcation goes through. The strong API manufacturing base in AP would bounce back (now majority of the companies have their presence in the JN Pharma City, Visakhapatnam). Delhi accounts for just 5.1 per cent in the total business in the country, while 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 silver lining is the rise of Himachal Pradesh which has officially 368 units and Uttaranchal with nearly 200 units in the recent past.

The fading charm
The most sought after areas in the North like Baddi, Himachal Pradesh and Uttarakhand are losing sheen as excise-free zones and is getting less attractive under the burden of technology up-gradation. These were the most sought after areas for the pharma and still have 400 units but 70 per cent of them are in the small and medium scale sector.

Only 20 per cent of units are owned by established big companies who are not much affected by the changing scenario. The area accounts for 35-40 per cent of the total production of drugs in the country. Excise was nil here when the outside it used to be 16 per cent. Now the duty has decelerated to four per cent which even though is a concession may not hold attractive as before. In fact over 50 per cent of the units want to shut shop at an appropriate time. Situation in Haridwar, Roorkee, Dehradun and Rudrapur in Uttarakhand is almost similar.

Since the excise imposed in non-free zones has come down, the government could give more concessions to help the existing free zone units so they become viable.

Low priority to bulk drug manufacturing
Moreover the bulk drug manufacturing activities in the north are not as prominent as in the south. Though the generics going off patent are still a force to reckon with, most of the north Indian outfits are largely into pharmaceutical formulations than bulk actives.

Therefore, CRAMS continues to be an area attractive to SMEs most who comply with Schedule M norms. NCR including Delhi, UP, Punjab, Haryana, specifically Chandigarh are the biggest strength of North India. Delhi continues to remain as the hub of regulatory network for pharma industry in the country.

Travails of small units
While the most important reason for the stunted growth could be the fact that duty-free zones are not as lucrative as before, small scale units are becoming unviable and gasping for breath due to competition.

Schedule M compliance compulsions, less friendly pollution norms, less sops from the government and competition from the large sector have been slowly pushing the small players out of the horizon. But for certain concessions given to SMEs by the government, the story has been worse for North Indian units.

Almost 75 per cent of the small scale units have moved to comparatively safer havens of excise free zones now. SSIs were at least 300 units in Haryana but now only 50-60 are left. In Delhi, there could be just 30-40 working now. So is the case with Punjab where once there were 500 units and now hardly 50 are remaining. Majority of them faced the logical end of their struggle—premature deaths,’’ according to a senior leader from the SME industry.

Very few are in the Active Pharmaceutical Ingredients sector while in the case of pharmaceutical and food excipients, the north remains a forsaken land both for the industry and the govt. It continues to be less attractive for APIs as most of them look for sea transport facility for obvious reasons. The recent developments in the Europe over the API following the amendment in EDQM standards has also hit the north Indian players, as in the case of other regions.