Large pharma companies who are keen on emerging markets to support top line growth cannot ignore investments in locations like Baddi in Himachal Pradesh and Uttaranchal along with Sikkim in the north. The two companies from Karnataka, Micro Labs and Bal Pharma which jumped into the bandwagon for strategic investments in the region between 2005 and 2007 still view Baddi and Uttaranchal ,destinations for domestic as well as emerging markets supplies.
On the whole, small and medium size units have a strong presence in Baddi and Uttaranchal primarily to carry on contract manufacturing assignments.
However Kaushik Desai, immediate past chairman, Industrial Pharmacy Division, Indian Pharmaceutical Association (IPA) consider North India particularly Baddi and Uttaranchal now unviable locations for continued investments from a long-term view point.
The region is facing tremendous challenges in terms of accessing and retaining skilled workforce. The regulatory landscape needs to be strengthened considerably. Further, the lack of additional tax benefits make it even more unattractive for companies to consider expansions. This has led pharma companies not to concentrate on these locations or even mull any additional expansions.
A section of pharma companies in the region stated that issues such as production plants in remote locations, unwillingness of skilled work force to relocate , constant challenge of hilly terrains in terms of transportation and logistics hamper efficiency in terms of time and money.
Moreover the regular findings of not-of-standard quality drugs manufactured has also sullied the reputation of this region. The stark reality is that the highest number of substandard drugs detected by the state drugs control departments across the country is from this region,.
Micro Labs and Bal Pharma
In the case of formulation development , Micro Labs Baddi plant has been designed to comply with regulatory standards and are in sync with other plants of the group. The facility is competitive in cost and the entry and investments into Baddi are in sync with the with the growth plans of the group, said SM Mudda, executive director- technical & operations, Micro Labs Ltd., chairman, Regulatory Affairs, Sub Committee, Indian Drug Manufacturers’ Association (IDMA) and chairman, ISPE India which is an affiliate and member of the Scientific body of Indian Pharmacopeia Commission.
It was in 2005, that the government created the excise free zones giving the pharma industry the ability to capitalize on investing in these locations and maximize the advantage of tax concessions. This is when these two south Indian companies chalked out a strategies to make a presence in the north by setting up manufacturing plants.
Micro Labs invested Rs. 40 crore in 2007 and in addition to initial investment there was a further investment of Rs. 15 crore in both plant and machinery besides upgradation of stores and quality control.
Bal Pharma commissioned its facility at Uttaranchal in 2009. It manufacture solid dosage form like tabs, caps and ointments.
Although we are currently catering to domestic requirement, the international regulatory audits would help us to cater to exports, said Archana Dubey Mitra, Associate Vice President – Exports, Bal Pharma.
The unit is well designed to take care of regulatory requirements for next couple of years; only a few balancing equipment would be needed as per needs of markets. Since it is a new plant it is up-to-date to the current technology as per industry requirement. There is a staff strength of 70 people and depending on market requirement , the strength can be increased, she added.
A peek into Baddi and Uttaranchal
It was in 2005, the MRP-based excise duty was fixed at 16 per cent which was later reduced to eight per cent in 2008. This ushered in a level - playing field for facilities in the region and outside. In 2012, around 40 per cent of the drugs manufactured in the country were from Baddi in Himachal Pradesh and Uttaranchal. The reduction in the excise duty benefit led the pharma companies to lobby for sops tax holidays and weighted deduction for in-house R&D.
North India has witnessed the arrival of large number of pharma companies in Baddi and Uttaranchal. The Government initiatives like tax free havens provided great opportunities to set up their world class manufacturing units in these locations.
Today there are concerns over the survival of small units in the region and the worries over lenient approvals of drug licenses which is leading to serious low quality of production practices. There is also concern of poor skill availability as personnel are swapped from the existing units with no new hiring and high levels of attrition in the region, said an industry observer.
Over the last seven years, north India has transformed into a pharma powerhouse which is not merely for drug manufacture but also for advanced research. Currently there is Cipla, Venus Remedies, Ranbaxy Laboratories, Jubilant Organosys, Surya Pharma Nectar Lifesciences, Panacea Biotec, Ind-Swift and Fresenius Kabi Oncology (the erstwhile Dabur Pharma).
Baddi is still having the maximum share among excise free zone in terms of production. All small and medium size units doing contract manufacturing have strong presence in Baddi, said Mudda.
There are no major issues. Overall the government and authorities are helpful and industry oriented. The only issue is the shortage of skilled manpower due to inter-company migration. Also transportation is a problem with poor roads hindering the movements of vehicles and goods. The people who have migrated from other states find education of children a major problem. Moreover health and emergency services are not organized. For all this ,they have to depend adjoining city Panchkula/Chandigarh.
For the future growth of the region, the government should offer more sops to lure companies to set up units in the northern region. This may include the extension of the tax free regime in the north, better infrastructure like an international airport in in Punjab or Chandigarh, tax breaks such as weighted tax reduction for the research and development expenditure, contract manufacturing and so on.