Industry & Economy
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Pharmaceuticals
`Outsourcing orders' by pharma cos take a beating
Nithya Subramanian
New Delhi, Jan. 12
THE Finance Ministry's decision of levying excise duty on retail price of drugs instead of manufacturing cost seems to have started taking a toll on companies undertaking third party production.
Ahlcon Parenterals Ltd, which manufactures injections and infusions for Cipla, Ranbaxy, Cadila, Dr Reddy's and Lupin, has already been hit.
Cipla cancelled its order just days after the Government announced the MRP-based excise.
Speaking to Business Line, Mr M.K.G. Pillai, Managing Director, Ahlcon, said, "Cipla has cancelled a Rs 12-crore annual order (Rs 1 crore per month) of the company following the announcement of the MRP-based excise regime. This order was for ciprofloxacin, metronidazole and ofloxacin infusions. We expect other clients to follow suit soon."
The company, which expects to close the current year with a turnover of Rs 42 crore, recently invested Rs 10 crore in renovating and installing a modern seal technology in its Bhiwadi plant.
Meanwhile, most of the companies involved in manufacturing bulk drugs for other companies are taking a cautious approach. Mr N.R. Munjal, Managing Director, Ind-Swift Ltd, said that the company has decided to put on hold all inventory being procured from the taxed zones.
"We expect companies to restructure their sourcing plans. They bring down their outsourcing requirements to the minimum," he added.
However, companies that manufacture bulk drugs for pharma biggies on an exclusive basis would not be affected.
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