More than 60 per cent of the pharmaceutical units in Madhya Pradesh have either closed down or moved away to excise free zones in the last two years due to unfavourable business environment.

If there were more than 500 pharmaceutical units in the state about five years ago, now the number has shrunk to just about 150 units. The introduction of MRP based excise duty regime from January 2005 and the Revised Schedule M norms caused at least 150 units to either shut down their units or flee to excise free zones by roping in loan licensees in those regions.

Currently, another 25-30 units are in the process of migrating to Himachal, Uttar Pradesh and J&K. With the Central Government decision to further extend the tax soaps by another three years, more units would migrate to the excise free zones, J P Agarwal, patron, Madhya Pradesh Small Scale Drugs Manufacturers Association told Pharmabiz.

He said this year only 42 local companies participated in the drug procurement tender for the year 2006-07 of the Madhya Pradesh Lakhu Udyog Nigam Ltd., which purchases drugs for the State Government run hospitals and clinics. Usually about 150 to 200 local pharma companies participate in the annual tender process.

Majority of the pharma units in the state are in the small-scale sector. Except for major companies like Ranbaxy Laboratories Ltd., Nicholas Piramal and Lupin which have manufacturing plants in Madhya Pradesh, not many pharma majors have invested in the State. Madhya Pradesh pharma sector provides direct employment to over 15000 and indirect employment to about 30,000 people including those employed in ancillary industries. Majority of the skilled labour force in the State also have migrated to tax free zones, said Agarwal.