Pharmaceutical units in Karnataka have stated that they would impacted seriously by the power tariff hike of 66 paise as proposed by the Karnataka Electricity Regulatory Commission (KERC). The power tariff hike is seen to escalate cost of production further in a drug price controlled regime with DPCO 2013.

Now the Karnataka Small Scale Industries Association (KASSIA) has also criticised the KERC proposal to revise power tariff for 2014-15. The Association has recommended to KERC to reject the petition filed by BESCOM (Bangalore Electricity Supply Company) which insists the hike.

“Power is indispensable for any industry and particularly in the case of pharmaceutical sector where Air Handing Units installed in sterile production zones are high electricity guzzlers. The power tariff in Karnataka at Rs.8 per unit is the highest in the country. Even if the hike is seen as miniscule, it would affect the total operational costs, Jatish N Seth, president, Karnataka Drugs & Pharmaceutical Manufacturers and director Srushti Pharmaceuticals told Pharmabiz.

According to a media report, a public hearing held by KERC on April 21,2014, KASSIA issued objections on Bescom’s petition for tariff which was filed beyond the period prescribed ‘not less than 120 days before the commencement of financial year’ and said it should have been filed on or before November 30 last year.

In its petition, KASSIA pointed out that the proposal to hike tariff by 66 paise per unit was to meet the gap of Rs.1,300 crore for fiscal 2015.

KASSIA noted that the Union government’s 2006 National Tariff Policy, which was fixed from 2011 should be within 20 per cent of cost-to-serve. But the Bescom has not worked out cost-to-serve and its proposed tariff hike could exceed the benchmark of 20 per cent thus violating the national policy.

Over 200 pharma units in the small scale sector view power hike as unwarranted. “We are already forced to put up with power cuts which has upset our production schedules and working hours. If the state provided uninterrupted quality power, then we would not mind a moderate hike”, said Harish K Jain, Treasurer, KDPMA and director, Embiotic Laboratories Pvt. Ltd.

The shortage of power is itself marring drug production schedules and also increasing the overhead costs of the company. There is also a serious loss of man-hours, Jatish added.

More over Karnataka is a hub for contract manufacturing and pharma companies catering to production needs of leading global pharma majors. The power cuts and high tariff would put our time lines adherence creditability at stake said Jatish adding there is serious contemplation of many pharma units to view alternative locations like Goa, Puducherry, Andhra Pradesh and Tamil Nadu.

Although companies like Biocon and Natural Capsules have already set up manufacturing plants outside Karnataka, pharma chiefs here see a slew of plant expansions outside the state.

According to Kaushik Desai, honorary general secretary, Indian Pharmaceutical Association(IPA), the pharma industry in the country is already bogged down by controls like DPCO 2013 and now with a slew of power tariff hikes in states including Karnataka would automatically increase drug production costs. This is where the government should now support the hike in end product pricing.

Karnataka Power Corporation Limited has 34 dams and 24 power stations with installed capacity of KPCL is 5975.91 MW.

According to a Union government report, India’s power generation capacity has doubled to 2,34,600 in 2013-14 MW, compared to was 1,12,700 MW in 2003-04.