The Hindu Business Line : Bulk drug exporters set to hike prices

Hyderabad, Aug. 19 Reeling under the impact of a strengthening rupee, the exporters of bulk drugs are planning to increase the prices for their global buyers.

“The rupee appreciation has hit the bulk drug exporters hard. The only way to stop incurring losses is to increase the price. About 10-15 per cent of the companies have already communicated the price hike to their buyers,” Mr M. Narayana Reddy, President, Bulk Drug Manufacturers Association of India (BDMA), told Business Line.

Rupee Appreciation

“We had to fulfill the previous commitments at the old price even after the beginning of appreciation. On an average, this hit the profit of the exporters (mostly SMEs) by about 10 per cent. All the new commitments would be on an upwardly revised price factoring in the rupee appreciation,” he said.

However, the industry does not completely believe that price-hike is a long-term remedy. “The global bulk drug market is highly competitive. The price increase from Indian firms may be advantageous to countries like China whose prices would be more competitive than those of India,” he pointed out.

But there is no way out. The companies are trying to convince the buyers that the price-hike may not be a long-term issue and that they were not in a position to swallow any further loss. “This is because in normal cases of rupee appreciation, the imports of some intermediaries being used by Indian firms become cheaper. It is not happening currently as some countries like China discontinued export incentives for their companies. This takes up the cost of import of intermediaries,” Mr Reddy explained.

Forex Reserves

To bridle the costs further, some companies are also taking up captive production of intermediaries. “If the buyers are not ready for price-hike most of the bulk drug firms may have to stop exports for sometime,” he added.

On the assistance from the Government to tackle the issue, the BDMA President said the comfortable forex reserves of the country were unlikely to put pressure on the Government to chip for relief. “The recently-announced package to tackle rupee appreciation reduced the loss by about 2 per cent. But still, there is an 8 per cent gap,” he said.

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