The Hindu Business Line : Pharma raw material imports from China turn costly; domestic SMEs see gain

Hyderabad, Jan 28 Small and medium enterprises (SMEs) in the pharma sector can look forward to better future as many companies are likely to source raw materials from domestic market due to spiralling costs of imports from China.

China has been a major source of raw materials for Indian bulk drug manufacturers due to cheaper prices.

However, during the last one year, the prices of raw materials (active pharmaceutical ingredients and others) have gone up by 5-8 per cent, according to industry experts.

Price Rally

“In the next two to three months, there will be a further hike in raw material prices from China due to removal of tax incentives of 5-7 per cent,” Mr M. Narayana Reddy, President, Bulk Drug Manufacturers Association (BDMA) India, told Business Line here.

Tight Market

While there was an export incentive package of 13 per cent in China, 6 per cent has been removed last year. In March, the remaining incentives would be withdrawn, leading to a further price hike in raw materials for India, he explained.

The Chinese market is also becoming tighter due to growing stress on eco-protection norms and a likely Olympic Games’ cess on some exports.

Advantages

To handle the price hike, a number of Indian companies have started looking for intermediaries and other raw materials in the domestic market.

“The situation is now favourable for intermediate product companies in India. Already, some companies have started cashing in on the situation,” Mr Reddy said.

Though there were SMEs to supply raw materials for the pharma industry, some time ago, in India, many of them had been closed due to imports from China. “Now the SMEs can reopen their units,” he said.

According to Mr A Venkata Reddy, President, Drugs and Pharmaceuticals Association (DPMA), a friendly domestic market is increasingly noticeable due to developments in China.

“Two trends are discernible. While some big pharma companies are going for backward integration by producing their own raw materials or APIs, the SME units are now being seen as a viable source of raw materials by many big and middle level industry,” he said.

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