The higher Goods and Service Tax (GST) rates have given a body blow to the lab chemicals and equipment manufacturers, who are already reeling under the Chinese onslaught.
Putting the lab chemicals and equipment manufacturing segment in the bracket of 12- 18 per cent tariff zone has heavily impacted the prospects of the domestic players. Industry analysts who had earlier pegged a growth rate of 25-30 per cent per annum post GST for the lab chemicals market, now fears a heavy slide in the annual growth rate.
“Though GST was aimed at removing the multi - taxation regime and bring in unified taxation, the decision to impose higher tariffs in the range of 12-18 per cent for the lab equipment and chemicals contradicts the central government’s objective of promoting ‘Make in India’ initiative. We urge the government to revisit the issue and help the industry grow on a robust pace,” says Govind Rao, Director of SS Lab Equipments, Hyderabad.
As per the GST council’s report, almost 90 per cent of non - organic and organic chemicals and chemical reagents and other compounds have been taxed up to 18 per cent.
Not just laboratory chemicals, but equipment manufacturers too are facing the brunt of GST. The Scientific Apparatus Manufacturers and Exporters (SAME) of Ambala have recently flagged concerns over the GST rates for scientific equipment used in laboratories and pharmaceutical industries.
The manufacturers and exporters say that the rates set by the GST Council will adversely affect the local business, which is already fighting for survival. Arun P Bansal, president of SAME, says “The GST council has fixed four tax rates of 5, 12, 18 and 28 per cent to apply on services. As per the finalised rate, we have to pay 18 per cent and 28 per cent GST, which is much higher than the taxes of 5.25 per cent that we have been paying earlier. The local industry is supplying its educational and testing equipment throughout India and in the international market. The industry has been facing a tough competition from China. Post GST, it will be very difficult for us to compete with China.”
At present Ambala in Haryana is the leading hub for manufacturing of laboratory and scientific equipment in India. There are nearly 4,000 units in Ambala, of which only over 2,000 are registered and the remaining are unregistered and doing business on a very small scale. The industry in Ambala has a turnover of nearly Rs 1,500 crore.
According to exporters, initially, only Ambala was making educational and research lab related products, but now China had captured a big share of the market. For the survival and growth of the micro industries, the government should come up with decisions according to the current market scenario.
After the imposition of these rates, the prices of products would go up and the schools would ultimately will have to recover it from the students. While the government has been taking the credit for exempting education from the GST, actually it has increased the cost of products which were used in schools, pointed out industry experts.
According to Bansal, due to higher taxes, the operational costs will go up by nearly 25 to 30 per cent. “If this situation continues, the small scale industry, which has been providing jobs to thousands of people, will be forced to down shutters, leaving a large number of employees unemployed,” says Bansal.
In fact, ever since the dramatic rise of pharmaceutical sector, the Indian laboratory chemical and equipment market in the country was on an over drive. While the lab chemicals market in the country is estimated to be around Rs 1200-15000 crore and is growing at 30 per cent annually, the lab equipment sector is generating a turnover of $1000 million with 10 per cent growth. Both sectors put together are registering 40 per cent annual growth.
The main reason for the buoyancy in the lab chemical market is due to the fact that Indian companies have been stepping up their R&D activity in pharmaceuticals and biotech drug development. Moreover companies are also strictly adhering to global norms and guidelines of good laboratory practices to survive in a highly competitive scenario.
In the lab chemicals space, Jubilant Organosys is one of the largest speciality chemicals companies in the country. Other players are Ranbaxy (New Delhi) SD Fine Chemicals (Mumbai), NICE (Kochi), Leonid (Bangalore and Loba (Mumbai).
The market for lab equipment is dominated by multinational companies, like Waters, Millipore, Sartorious Applera Corp, Thermo Electron, Agilent Technologies, Perkin Elmer, Shimadzu, GE Healthcare, Bruker Group, Beckman Coulter and Varian.
In the area of lab chemicals, there is a cut throat competition in India for quality and pricing with the presence of Chinese products, pointed out S Paul Joshua, manager, quality control, Leonid Chemicals. In this regard companies are bulking up facilities to beat Chinese competition.
Lab equipment players have also seen major expansion and growth. With Indian pharma-biotech companies showing an increased awareness for the need for good quality lab infrastructure, it is boom time for the business," says Sailatha, Proprietor of Vishnu Priya Chemicals limited in Hyderabad.
For the lab equipment majors, 43 per cent of the business is generated from the research and development institutes. This is followed by analytical services 24 per cent, quality assurance and quality controls 20 per cent. In India with the patent regime, there has been a prolific growth of the research and development activities.
Lab chemicals and equipment market
India's market for chemicals is estimated at US $ 35 billion. Owing to the increasing wealth of the Indian population and accumulated needs, analysts expect further growth in the future, a new market report by Germany Trade and Invest says.
According to German Trade and Invest survey report, India's chemical industry, although on a back foot compared to the European or American industry leaders, is still on a growth curve. The country is estimated to be the world's 12th largest producers of chemicals and expected to profit from its emerging economy and consumer demand. The IIP index of industrial production for chemicals rose by 2.3 per cent the last year.
An even higher growth is expected for the current year, mostly driven by a rise in market demand of automotive supplies, building and construction and consumer goods.
The Ministry of Chemicals and Fertilizers estimates the country's chemicals market at US $ 35 billion. The Indian Chemical Council has even projected the Indian chemical markets to reach a total US $ 68 billion market (basic chemicals US $ 33 billion, speciality chemicals US $ 17 billion). Both still expect a big potential for growth in the Indian chemicals market.
While Indian market for laboratory chemicals and equipments is majorly driven by pharma sector, some of the other key sectors which will drive the demand for laboratory and analysis market include performance and R&D spending of chemical, food & beverages, oil & gas, and academics etc.
According to Madan Mohan Reddy, Chairman, Pharmaceuticals Export Promotion Council Pharmexcil “The pharmaceutical sector will continue to grow in future and is expected to become third largest pharmaceuticals market by 2020 in terms of incremental growth and can generate US$ 45 billion in revenue by then.”
Global laboratory chemicals market
The global laboratory chemicals markets have been witnessing a positive growth since 2016 and are expected to reach its peak by 2021.
Laboratory chemicals are compounds or substances that enable a chemical reaction, which help to either measure, detect, or manufacture other chemical substance. These chemicals are extensively used on a large scale for commercial applications, as well as, research and development purposes.
As the healthcare sector is growing, a large number of diagnostic centres are emerging across the world. In countries like India, China, Central Asia and other African and European countries, the lab chemicals market is witnessing a positive growth. Antibodies are becoming increasingly significant, both as diagnostic as well as therapeutic tools, for targeting diseased cells and cell compounds.
The market for monoclonal antibodies is expanding rapidly throughout the world since it offers effective treatment of diseases that include infectious diseases, cardiovascular diseases, inflammatory diseases, as well as cancer, and autoimmune diseases. The growing importance of monoclonal antibodies can also be attributed to its negligible and low-toxicity level and considered potential to serve as a catalyst to deliver a drug. With the increasing launch of new monoclonal antibody therapeutic products and rising applications for current products, the market for antibodies is expected to rise during the forecast period.
The market dynamics
The laboratory chemicals market is growing primarily due to a significant increase in their use in basic research applications, coupled with large-scale commercial applications. Moreover, growing interest of the world scientific community in such chemicals is anticipated to escalate the growth of the laboratory chemicals market.
An ongoing refinement and advancement of technologies such as cell culture, recombinant DNA, and bio therapeutics, have enhanced the scientific community’s ability to identify and produce important human therapeutic agents over the years. This has fuelled the robust growth of laboratory chemicals market during the past few years. The emerging disciplines, such as neurosciences and proteomics, are also expected to help drive the market growth in the future.
Market segmentation
The laboratory chemicals market is segmented by type into molecular biology, cytokine & chemokine testing, carbohydrate analysis, immunochemistry, cell/tissue culture, environmental testing, and biochemistry, among others. By application, the market is segmented into academic, environmental, healthcare, research & development of life sciences, and quality control, among others.
Global laboratory chemicals market share
Molecular biology is a study of the interaction of macromolecules present in living cells, utilizes reagents of classes such as monoclonal & polyclonal antibodies; gene expression, vectors, cloning & sequencing; and gene synthesis, among others. This constitutes the largest application area of laboratory chemicals. Cytokine & Chemokine Testing is the fastest growing application area regarding consumption and is projected to grow at a compounded annual rate of 6.1 per cent over the analysis period.
Currently, North America, especially the United States, represents the largest regional market for laboratory chemical worldwide, owing to technological developments and innovations in the nucleic acid testing procedures, advancements in molecular pathology assays and improvements in cell/tissue culture technology, etc. Asia-Pacific represents the fastest growing market, with sales of laboratory chemical reagents projected to grow at a compounded annual rate of 5.4 per cent through 2016.
Opportunities and market players
A plethora of new opportunities in molecular biology was unveiled with the conclusion of the human genome project, consequently expanding the versatility of Polymerase Chain Reaction (PCR). Currently, PCR technologies are extensively used in numerous molecular biology applications, including gene expression, paternity testing, forensic fingerprinting and DNA sequencing, apart from the conventional drug discovery segment. The increasing sales of thermal cyclers are driving the market sales of PCR reagents, as well.
Some of the major companies dominating this market for its products, services, and continuous product developments are -AppliChem GmbH, Beckman Coulter Inc, CALTAG Laboratorie, EMD Chemicals Inc, GE Healthcare, Honeywell Riedel-de Haën, Lonza Biologics Ltd, Merck Chemical, Meridian Life Science Inc and Promega Corporation.
SAFC Biosciences Inc, Shimadzu Biotech, Sigma-Aldrich Corp, Thermo Fisher Scientific, Wako Pure, Chemical Industries Ltd., Waters Corp are among other major laboratory chemical manufacturers globally.