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TN firms hope turnaround in fortunes
Gireesh Babu, Chennai | Thursday, September 7, 2006, 08:00 Hrs  [IST]

The Tamil Nadu pharmaceutical industry, now going through one of the toughest times in its history due to a host of policy issues and market environment, hopes of a turnaround in near future with timely policy initiatives and better business strategies for survival.

In the last few years, many units have been closed due to their inability to modernize as per the provisions of the Revised Schedule M guidelines. Many units migrated to the excise free zones of Uttranchal, Himachal Pradesh and Jammu & Kashmir and to the neighboring Union Territory of Pondicherry to take advantage of the excise concessions and other incentives available in these regions.

Almost 22 to 25 companies from the state have shifted manufacturing activities to the excise free zones and around 30 companies have shifted to Pondicherry in the recent past, estimate industry sources. Apart from this, another 30 to 40 percent of the SSIs are facing closure threat due to non-compliance of Revised Schedule M guidelines. The Tamil Nadu Drugs Control Administration (TN DCA) has already started sending stop-production orders to 100 odd companies, which failed to respond to the show cause notice, and to the companies that had asked more time for GMP compliance.

The drug control officials estimate that around 25 percent of the companies from a total number of around 600 manufacturing licensees issued in the State will have to face closure threat due to their inability to comply with the Schedule M norms. The DCA is ithe process of re-inspecting another 200 to 250 companies, which claim to have completed GMP compliance. This means currently only around 40 percent of the pharmaceutical companies in the state comply with the norms.

However, major companies in the State like Orchid, Shasun, Medopharm, Fourrts Laboratories, Tablets India etc. are growing rapidly tapping international markets.

Industry also fear that migration of local industries to excise free zones will gain momentum due to the central government's decision to extend the central excise concessions of the excise free zones up to 2010. They cite that after the extension, companies like Grandix Pharmaceuticals announced their plans to shift their domestic manufacturing base to Himachal Pradesh.

Despite the odds, still the pharma industry in Tamil Nadu, which mainly constitute SSI units, is the fourth largest pharmaceutical producing state in the country, next to Maharashtra, Gujarat and Andhra Pradesh. TN pharma has potential to grow manifold provided better policy initiatives and infrastructure support are offered by the State and Central Governments, note industry sources.

As an initiative in this direction, they cite the State Government's decision to commence a Special Economic Zone (SEZ) Pharma Park at Nanguneri. It is the first SEZ pharma park mooted by the state government. Tamil Nadu also has the distinction of starting a cluster of pharmaceutical units when even the cluster business approach was unheard in India. The first cluster of pharmaceutical industrial units came up at the Aalathur Pharmaceutical complex in 1979, thanks to the initiative taken by the then Chief Minister Dr M G Ramachandran.

The new pharma park is envisaged in an area of 250 acre and is expected to shelter around 40 to 50 large, medium and small-scale pharmaceutical manufacturers and around 10 allied industries, according to the state health minister K K S S R Ramachandran. Announced in the State budget this year, the park is expected to provide 2,800 direct jobs and 6,000 indirect jobs and is estimated to produce drugs worth over Rs 500 crore per annum.

Though the industry opines that SEZ is not adequate to better the conditions of the industry, the move can be considered as a positive sign of better support in future. Industry associations in the State demand setting up of an excise free zone with similar concessions allowed in Himachal Pradesh, Uttaranchal and Jammu & Kashmir to attract manufacturing companies from all over South India towards the state.

The SSI units in the state, which mainly relied on contract manufacturing for survival, are the most affected by the excise free zones. Most of the major companies that had been providing contract jobs to the TN units, have now either set up their own units or are giving orders for contract manufacturing companies in the excise free zones.

Meanwhile, around 23 private drug factories have come up in various parts of Tamil Nadu in the last three months, after the appointment of a Drugs Controller. The day-to-day functioning of the state DCA was affected due to lack of a qualified department head from July 2005 to June 2006. Public Interest litigation was also filed in the Madras High Court for appointment of a pharma graduate as the Drugs Controller. Currently, the government has promoted some officers to fill up the top-level official vacancies, and handed over charge of the drug controller to a deputy director of the department.

Around 25 to 30 new pharmaceutical companies have come up in the state in the last few months, according to sources from the industry. Adding to the developments, the ABL Biotechnologies Ltd. launched its pharma division this year, while TTK Pharmaceuticals Ltd., Burgeon Pharmaceuticals, Bafna Pharmaceuticals and Apex Laboratories are already planning to invest in more manufacturing facilities in the state.

The government's decision to implement Value Added Tax (VAT) regime since 1st January 2007 came as a relief to the industry and trade in the state. The VAT implementation was warmly welcomed by the industrial associations in context of introduction of MRP inclusive all taxes regime since 2nd October 2006.

The industry here also pins hopes on support from the Central Government for technological upgradation of the pharma cluster at Alathur with new facilities for R&D and industrial development. The state government is also planning to appeal the central government for a centralized excise free zone in the state, according to sources. Along with these developments, the DCA has submitted a new proposal for setting up a drug-testing laboratory with the help of the World Health Organization (WHO), it is learnt.
The Indian Systems of Medicines (ISM) sector is also facing serious problems related to compliance of Schedule T norms and the technical obstacles in quality testing of raw materials and standards of drugs. However, major Ayurveda manufacturing units like the Arya Vaidya Pharmacy (AVP) Coimbatore are planning to expand their activities internationally.

The Arya Vaidya Pharmacy (AVP) Coimbatore has announced its plans to commence an Ayurveda hospital at Pakistan, in tie up with Mehrunnisa Hospital, Karachi. The project will take off by December 2006. Cholayil Pharmaceutcials, manufacturer of popular herbal soap Medimix, is planning to expand its business to Europe. The Madurai based Arya Vaidya Nilayam (AVN) has plans to come up with a range of products and new R&D and manufacturing facilities, eyeing the international markets.

However, Siddha, Tamil Nadu's contribution to the ISM sector, has not modernized enough to tap the potential in national and international markets. Companies like Arvind Herbals Ltd., Raja Siddha Maruthvam and Indian Medical Practitioner's Co-operative Pharmacy & Stores Ltd. (IMPCOPS Ltd.) have only reasonable growth in the recent years, which also confined to the domestic market, note Siddha industry sources already planning to invest in more manufacturing facilities in the state.

The government's decision to implement Value Added Tax (VAT) regime since 1st January 2007 came as a relief to the industry and trade in the state. The VAT implementation was warmly welcomed by the industrial associations in the context of introduction of MRP inclusive all taxes regime since 2nd October 2006.

The industry here also pins hopes on support from the Central Government for technological upgradation of the pharma cluster at Alathur with new facilities for R&D and industrial development. The state government is also planning to appeal the central government for a excise free zone in the state, according to sources. Along with these developments, the DCA has submitted a new proposal for setting up a drug-testing laboratory with the help of the World Health Organization (WHO), it is learnt.

The Indian Systems of Medicines (ISM) sector is also facing serious problems related to compliance of Schedule T norms and the technical obstacles in quality testing of raw materials and standards of drugs. However, major Ayurveda manufacturing units like the Arya Vaidya Pharmacy (AVP) Coimbatore are planning to expand their activities internationally.

The Arya Vaidya Pharmacy (AVP) Coimbatore has announced its plans to commence an Ayurveda hospital at Pakistan, in tie up with Mehrunnisa Hospital, Karachi. The project will take off by December 2006. Cholayil Pharmaceutcials, manufacturer of popular herbal soap Medimix, is planning to expand its business to Europe. The Madurai based Arya Vaidya Nilayam (AVN) has plans to come up with a range of products and new R&D and manufacturing facilities, eyeing the international markets.

However, Siddha, Tamil Nadu's contribution to the ISM sector, has not modernized enough to tap the potential in national and international markets. Companies like Arvind Herbals Ltd., Raja Siddha Maruthvam and Indian Medical Practitioner's Co-operative Pharmacy & Stores Ltd. (IMPCOPS Ltd.) have only reasonable growth in the recent years, which also confined to the domestic market, note Siddha industry sources.

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