About 500 odd contract manufacturing units, operating in different parts of India which upgraded their facilities in the last two years anticipating contract business opportunities, are facing closure threat consequent to the MRP based excise duty regime in place since January, this year.

Numerous units are retrenching their workers and have enforced reduced working hours due to dried up orders, informed sources told Pharmabiz. If the units were flushed with orders for running the units throughout a month before the MRP notification, now business is not adequate to run the factory for even a week.

They said almost all these units borrowed funds to invest about Rs 1-2 crore each for setting up WHO-GMP standard manufacturing premises with huge spare capacities, anticipating business from domestic and overseas drug majors when India transforms to the product patent regime. However, with the enforcement of MRP based excise duty, the companies are in quandary that either to close down their units or migrate to excise free zones of Uttaranchal, Himachal and Jammu and Kashmir.

Drug majors have discarded most of these companies and had informed in January itself to urgently migrate to excise free zones for enjoying continued business relationships. Already many of the affected units are scouting for potential buyers to their facilities and have started advertising in industry magazines. According to reliable sources, so far many units have retrenched their workers, as job work for a month lasts only for a week or so. Capacity utilization is less than 20 to 30 per cent.

Indian Drug Manufacturers Association (IDMA) sources said about half of its SSI members numbering around 200 units had invested heavily, at least Rs 300 crore. Now they are in deep trouble. According to the statistics with Confederation of Indian Pharmaceutical Industries (CIPI-ssi), 625 contract manufacturers are operating in various pharma hubs in the country, accounting for 45 per cent of the total SSI turnover, contributing about Rs 3150 crore. All these units are being wiped out of the business, since major companies are either setting up own units in Himachal and Uttranchal or entrusting work with the units already functional in that region.

Considering the scenario, IDMA is planning to educate the contract manufacturers to find ways for utilizing their huge excess capacities. As part of this, IDMA is organizing a one-day seminar in Mumbai on 5th August on the ways for small and medium scale units to better market their products and services. The seminar would be replicated in other centres if required, said S V Veeraamani, Vice President, IDMA and Chairman of the SSI Sub Committee of IDMA.