The Hindu Business Line : Eco norms begin to bite small, medium units in pharma space

Hyderabad April 17 The small and medium enterprises (SMEs) in the pharma industry are on a declining path suffocating under the burden of investments required for fulfilling the environmental norms.

"At a time when the SME growth is becoming an accepted model to spur the industry, SMEs in the pharma industry are hard hit by lack of ability to invest heavily on facilities. Their growth has slowed down in the recent past," Mr M. Narayana Reddy, President, Bulk Drug Manufacturers Association of India (BDMA), told Business Line here.

The SME boom that was apparent in mid-1990s is now on the wane. To meet the standards of environmental regulations, one needs huge investment, which is beyond the scope of SMEs. "Though the exact number at a national level could not be given at present, some SMEs are exiting while the new SMEs have become a rarity," Mr Reddy said.

According to industry experts, the decline of SMEs between 1990 and 2005 could be at about 20-30 per cent.

Interestingly, the downslide of SMEs is happening at a time when the overall industry has been growing. "This is understandable as the big players are getting bigger with growing market shares. But it appears that the SME era in drugs is vanishing," he said.

Of course, there is a way out. "We have requested the Government to adopt a cluster-based approach for promoting SMEs. It can invest in developing facilities such as waste disposable and effluent treatment plants. The units in the cluster can come up with a pay and use method," Mr Reddy said.

The model for SME growth can be similar to what is being done to promote infrastructure. "Models like build, operate and transfer (BOT) are successful in infrastructure. Similar models should be worked out for SMEs in pharma sector," he explained. As a significant portion of Active Pharmaceutical Ingredients (APIs) is being produced from the SME sector, immediate steps should be taken to safeguard their interests. Mr Reddy said.

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