The Hindu Business Line : Virchow Labs hit by Chinese dumping duty

Major impact
Virchow is the only Indian firm exporting sulfamethoxazole, a key antibiotic.
It caters to more than 80% of the global requirement.

Hyderabad June 16 The Chinese Government has imposed an anti-dumping duty of 10.5 per cent on sulfamethoxazole from India. This recent decision is expected to have a major impact on Virchow Laboratories, a world leader in the production of this key antibiotic.

According to Mr M. Narayana Reddy, Managing Director of the Hyderabad-based Virchow Labs: "Along with additional duties in China, the total anti-dumping burden would be around 19 per cent."

Pricing Advantage

"Some companies in China are also manufacturing sulfamethoxazole. However, due to superior technology, we are able to supply the drug at the price equivalent to their raw material cost. The anti-dumping duty now takes away that pricing advantage for Virchow, the only Indian firm exporting the drug," Mr Reddy told Business Line.

Virchow caters to more than 80 per cent of the global sulfamethoxazole requirement and China is its largest customer. The company exports about 2,000 tonnes of the product to China at a price of $8.5 per kg, which constitutes 20 per cent of its total sales (Rs 500 crore last fiscal).

The anti-dumping duty would be in force for five years from now. "If the Government of India takes up the case it may be removed after some time, but there is no guarantee," he observed.

Sulfamethoxazole is a commonly used antibiotic in the treatment of urinary tract infections. It is also used as an alternative to amoxicillin-based antibiotics to treat sinusitis.

Mr Reddy, who is also the President of the Bulk Drug Manufacturers Association, said the company was taking appropriate steps to offset the impact and exploring an alternative product line to sustain profits consequent to the Chinese Government move.

To protect its sales, the company had already reduced the price of sulfamethoxazole from $8.5 to $7 per kg. "This only helps us to be afloat in the Chinese market but we will lose our profit," Mr Reddy admitted.

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