The government has been talking of a cluster development programme for the pharmaceutical industry for some time now to make it more competitive and self sufficient in the wake of increasing complaints of quality by the US FDA and the industry’s excessive dependence on China for its API requirements. These two issues have seriously affected India’s export of generic drugs to the US and Europe in recent years. Quality and safety of pharmaceutical products get compromised because of undesirable manufacturing practices and also on account of substandard materials used for their production. The decision of the Department of Pharmaceuticals (DoP) to launch a cluster development programme for pharma sector (CDS-PS) last month is probably one major step to meet this new challenge. DoP’s initial plan is to set up six pharma clusters by the end of this financial year and of which three are likely to be greenfield projects. Under the scheme, pharma clusters will get a financial assistance to the extend of 70 per cent with a limit of Rs. 20 crore for each cluster, to set up common facilities such as effluent treatment, R&D laboratories, logistics and training facilities. A cluster has been defined as a zone having at least 15 pharma units within a radius of 10 km. The cluster development programme for the sector is expected to be implemented on a public private partnership (PPP) format through one time grant-in-aid to be released for creation of identified infrastructure and common facilities. The scheme is for setting up new clusters as well as for up-gradation of existing clusters. The ministry has set aside Rs.125 crore to be spent on the scheme for the next three years.

The main focus of this programme has to be revival of bulk drug production in the country. India has been a major producer and exporter of quality APIs during eighties and nineties. From that position, API production steadily declined during the last 15 years as the formulators started opting for cheap Chinese materials for most of their requirements. In fact, cheaper imports from China not only affected the domestic bulk drug industry but also started causing health problems to the people of this country because of the poor quality of APIs and intermediates used for making formulations. These clusters have to, therefore, identify a list of widely prescribed antibiotics, analgesics and drugs used for treating lifestyle diseases and take up their production. Manufacture of many of these APIs were discontinued by the domestic players over the years because of cheaper imports. The government should therefore start hiking customs duty on imports of these APIs as a protection and incentive to the API producers in the clusters. Strict vigilance is required to see whether imports of these drugs still coming into country despite duty imposition. At the same time, there is also a need for either abolishing or sharply reducing the excise duty on APIs at least for a period of five years.