CeChem Pharmaceuticals, an ISO 9001-2000 Bangalore-based contract manufacturer and formulation unit, is in serious crisis mainly on account of the MRP based excise levy on drugs. The excise rule has affected several SSIs like CeChem with their clients planning to move to special economic zones of Baddi, Uttaranchal and Jammu & Kashmir.

The company's Rs 1.5-crore investment in 2004 end to become a WHO- GMP and Schedule M compliant unit has turned into a liability since the company sees no possibility of a return of the investment. The formulation facility produces capsules, tablets and liquid orals.

"We had taken a big risk by investing huge sums of money to upgrade our production plant and earn more customers. But with the excise duty on MRP announcement made in January 2005, many of our customers are planning to move tax free zones, rendering our investment a waste," M Chandrashekar, proprietor, CeChem Pharmaceuticals told Pharmabiz.com

While job works form 60 per cent of CeChem revenues and the rest comes from sales of branded and generic formulations. The situation is threatening because it is not financially viable for small operators like CeChem to set base at tax-free zones in North India.

CeChem, set up in 1988, has a product range of antibiotics, analgesics, anti pyretic, cough syrups and B complex with iron which is marketed only within Karnataka. The company also exports 50 per cent of its products to Malaysia and Dominican Republican. Plan to expand overseas sales is unthinkable because product registrations are unaffordable in many countries, stated Chandrashekar.

Terming the government move a let down, Chandrashekar said that the only option left for him was to sell the unit or wait for a takeover. With just half an acre of land asset, the chances of an acquisition are also remote. "In the current scenario we feel doomed," he added.

There are several small companies in the state facing a similar fate. The cause for resentment among SSIs in the state is the imposition of fringe benefits tax (FBT). Also certain drug combinations which are permitted to be manufactured by the neighbouring states and marketed here are not allowed to be produced in Karnataka which leaves the small-scale sector lose out on the opportunity. Certain Products which the small units get easy manufacturing licenses, are also coming under the purview of the DPCO.