India’s entrepreneurial-driven pharmaceutical industry is now facing the challenge to expand operations in the wake of tardy reforms. From a poor investment climate to absence of investor confidence and the slow pace of project approvals are seen as a concern for companies.

“We are unable to expand as land approvals are unclear and the falling rupee is also aggravating issues leading to high import cost of raw materials. The rupee depreciation is no longer seen as positive factor to garner export earnings in the backdrop of rising inflation leading to higher   capital expenditure from power to wage costs. Even if a falling rupee increases exports, the revenue margins would be something less to cheer about as the growing import of excipients mars the profitability for companies. There is also pricing pressure from customers from US and Europe with the falling rupee,” stated pharma entrepreneurs.

There is a general sense of pessimism, apprehension and frustration about the lackadaisical attitude of the government, they added.

Airing similar sentiments of other pharma entrepreneurs in the country was Anjan K Roy, managing director, RL Fine Chem and Committee Member, Karnataka Drugs & Pharmaceutical Manufacturers Association. “Global and national regulatory authorities have tightened the regulations. Therefore, industry should upgrade and modernize to be able to adhere to the latest norms which require investments. The general liquidity crunch has resulted in high interest rates for bank loans making it unviable to invest in existing or new manufacturing facilities. We are now stuck with no potential for future growth.”

Terming the current scenario as one of turbulent times, Harish K Jain, director, Embiotic Laboratory, said that he has never faced such a situation in the last 22 years as an entrepreneur. From a sliding rupee making the dollar virtually at an unaffordable point, small-medium companies find it difficult to meet their import obligations.

The sharp Rupee depreciation is a cause of great concern as it signals stagflation. This will lead to a further widening of the Current Account Deficit (CAD) and pose a grave challenge to contain the fiscal deficit. The only positive of a weak Rupee is our export competitiveness, albeit customers will call for a dollar denominated correction sooner than later.   The pharma sector is no exception because it depends on a large import component for manufacturing despite the enhanced export prospects that a weak currency provides. Adding to this is the recently announced price control on essential drugs which would result in Indian drug companies abandon low margin manufacturing and prefer import substitutes at higher cost to the exchequer, said Kiran Mazumdar-Shaw, CMD, Biocon Limited, another entrepreneur who is downbeat about the current scene of the industry.

If the Government is desirous of enabling the Indian pharma industry to tide over this difficult economic environment, it must roll out greater incentives to exporters to offset import costs. Furthermore, imports of finished formulations must be discouraged through additional duties and favour indigenously produced drugs in government tenders. These measures alone will be a step towards containing the CAD, Shaw added.