Behind the jingoism, some hard truths for API-makers

PT Jyothi Datta | Updated on June 05, 2020

Plug implementation gaps, says industry, hit repeatedly by any standoff with China, virus-related or otherwise

The last few days have been a tussle with bankers and financiers for Avinash*, co-founder of a mid-sized company making active pharmaceutical ingredients (API).

Despite ₹80-crore worth of orders in hand, he has been unable to produce APIs without working capital to cover his expenses. Banks are not inclined to give him the funds without seeing his performance over the next three months, he alleges.

“How do we remain standing till then,” he asks, exasperated that measures announced by the Centre to help small and mid-sized entrepreneurs tide over the lockdown months are not, in fact, reaching them.

Avinash has cut on research spending meant to develop new products. Instead, this money is being used to pay salaries to produce at least the regular products for “survival”.

Entrepreneurs are being forced to explore diluting equity in the company, he says, to raise funds to run the operations, as all other avenues come a cropper.

And precisely for these reasons, Avinash and entrepreneurs like him are cynical of campaigns to boycott products from China. Recently, innovator and educationist Sonam Wangchuk called for a boycott of Chinese products to protest the army standoff with India. And this was a culmination of sorts, after countries and Governments witnessed shortages of medicines, masks and ventilators, to name just a few products, during the pandemic spread of Covid across the world from its epicentre in Wuhan, China.

There may be reason for such outrage among people, says another pharma industry hand, unwilling to be named given the sensitive nature of the issue. But it will be forgotten in months, he says in anguish. As an industry that has repeatedly been impacted by developments in China, be it a virus, environment concerns or a political stand-off, representatives of the pharmaceutical industry temper the jingoism with some hard realities.

“When the lockdown is over, companies will be back in China sourcing cheaper raw materials”, he says, because the domestic business environment is tough on entrepreneurs. Governments are not listening to small and medium-sized players in this industry and not focussing on what the country needs. It makes no sense competing in the volumes segment like a penicillin or paracetamol, he says, urging the Government to focus on the country’s chemistry and IT skills and support cancer products, biologics, and so on.

His company, for instance, makes API for two products being researched and used in other countries for Covid-linked conditions. But there have been no queries from Indian authorities for the product or support of any kind, he says, adding that China, however, thinks streets ahead of competition on products.

“As tax-paying companies, all details are available with the Government and yet when authorities speak to the industry, they speak to large players,” he rues. He urges authorities, especially those dealing with medium and small enterprises, to speak to the different layers that exist within an industry segment to understand the entire extent of the problem.

There has been a long-standing policy rumble on strengthening India as a bulk-drug and API-maker. “But APIs are tricky business,” says Avinash, referring to labels of being a “dirty” trade because of the environmental pollution concerns that come with making these products. “Tobacco is dirty too, but it brings in money. Industrial areas where API-makers operate away from residential areas are also under pressure as residential areas expand and expensive real estate comes into the picture,” he says.

Alternate base

Besides financial support, API-makers need effluent treatment plants, research facilities, etc, and on all these counts the industry faces an uphill task, says an industry hand. If the situation continues, many will exit the business.

To reduce dependence on China, companies are looking at countries like Vietnam, Bangladesh, Malaysia and Indonesia, says Avinash. Instead of getting into a high-volume low-margin operation, India should play to her strengths and have, with other countries, an economic bloc of sorts where they can source from each other and not be dependent on any one country. Without implementation of such measures, mere rhetoric is meaningless, he says.

*name changed to protect identity of the person

Published on June 05, 2020

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