The Karnataka Drugs and Pharmaceuticals Manufacturers' Association (KDPMA) has indicated to the ministry of labour that its draft notification of minimum wage showed a drastic increase of 68 per cent to 73 per cent of salary which would be too much for the industry to absorb. The rise in wages is across highly skilled to skilled, semi-skilled, drivers and other office staff.

At the lowest level, the current pay per day (PPD) is Rs.228 + benefits which was Rs.216 till March 2015. The proposed Rs.396 + statutory benefits PPD is a 73 per cent increase. The industry has been already conforming to the minimum wage increase annually adopting a 6 to 14 per cent hike from 2010-11 to 2015-2016. Now the government draft notification mandates a 82.96 per cent annual raise. But such an escalation in salary pay-outs would be catastrophic for companies specially the micro, small and medium enterprises (MSMEs), Sunil Attavar, president, KDPMA told Pharmabiz.

While the industry very much supports the government to ensure an increase in minimum wages in line with growing cost of living to ensure a decent standard of life, it has suggested that the increase be staggered. A one shot rise is too much take on and is a detrimental to the future growth of the companies. Companies will not be able to pass on the cost to the consumers as they have to adhere with the Drugs Price Control Order 2013 on the one hand and to drive sales in the domestic market and an uncertain international arena to drive sales, he added.

The Association which represents large and MSMEs do not mind committing a staggered pay rise over the next five years to ensure healthy growth of this industry. In its representation to the government, it stated that Karnataka was home to 260 licensed drug manufacturers generating revenues of Rs.13,000 crore of which Rs.6,000 crore constituted exports. In addition, Rs.1,500 crore is chipped into the state exchequer. The sector provided 30,000 direct and 60,000 indirect jobs. Considering its huge potential for growth and employment generation, recently the Karnataka government included pharma sector as focus area to attract investments.

The Association has now put-forth a few special considerations that needed to be addressed especially for the pharmaceutical industry before taking a final decision on the minimum wage hike. It highlighted the DPCO 2013 where the MRP (Maximum Retail Price) of the product was controlled by the government. For scheduled products coming under National List of Essential Medicines (NLEM), the annual price increase was allowed in line with the wholesale price index. An increase of only 3.74 per cent was announced by the government in March 2015 and this year the prices were actually reduced. In addition, there was a cap on increasing the non scheduled drug prices over 10 per cent in a year.

The state accounts for large contract manufacturing businesses where SMEs are engaged in producing leading brands for multinationals. Now for job works, the minimum wage share was 60 per cent of revenues. The steep increase would adversely impact the production as these companies could shift their production to other states and companies offering a lower price. Such a move will now see negative cascading effect causing major hardships to both companies and their workforce.

As a survival strategy, companies will work towards saving costs, adopt automation to make industry labour redundant. Overhead issues like power cuts, high tariff on electricity and water shortage are making it difficult for the pharma industry. The sudden steep wage increase will make it unviable to operate. The Association hopes that the concerns they have raised will be considered by the government when releasing the final order.