HYDERABAD: A special export package for the Rs 33,000-crore pharma industry is on the anvil. Pharmexcil, the government’s pharma export monitoring arm, has sought enhanced sops under export promotion schemes and a cut in the interest rate on loans to the sector.
Just like other sectors, the pharma industry, too, is bearing the brunt of the slowdown and the subsequent credit squeeze. Drug makers and exporters reckon that a special package could help curtail losses amidst rising raw material costs.
Companies apprehend significant erosion in their profit margins if the existing product development plans are inadequately funded as Chinese firms are expanding their production capacities rapidly. Pharmexcil has sought more credit to exporters under the duty entitlement pass book scheme (DEPB), under which customs duty paid on imported goods is set-off against the exported product.
Export-driven domestic pharma companies also want a cut in the interest rate on rupee loans and liberal lending norms. Several pharma companies, including mid-and small-sized firms, have informed the government that banks, domestic as well as international, have stopped disbursals even on sanctioned loans.
"Reputed financial institutions overseas are also not remitting funds to Indian companies though their clients have made payments," said M Narayana Reddy, President, Bulk Drug Manufacturers' Association (BDMA).
Pharmexcil has also sought a restoration of the grace period of 25 days in sync with the Foreign Exchange Dealers’ Association of India (FEDAI) provisions. "Credit availability has been a major problem for exporters as foreign exchange is not available for roll over of letters of credit," P V Appaji, executive director, Pharmexcil, told ET.
Its wish-list also covers a hike in the prices of pharmaceutical products by the National Pharmaceutical Pricing Authority (NPPA) and better infrastructure, plant and equipment. A higher price for drugs would fetch drug makers greater revenues on the back of the rupee falling against the greenback.
The rupee has depreciated by 25% vis-a-vis the dollar since April.
While recession has impacted the business of pharma companies in India, some still see the present crisis as an opportunity waiting to be tapped.
This is because generics and active pharmaceutical ingredients (APIs) made in India are more affordable and competitive compared with those manufactured in the rest of the world. Says Kiran Mazumdar Shaw, Chairman and managing director, Biocon: "India could be a global enabler for affordable drug development in times of a recession."
Currently, the Indian pharmaceutical industry, which employs more than three million people, is ranked fourth in volume terms and 13th in value terms in the world. The country accounts for 8% of the global production and 2% of the world market.
Source : The Economic Times