 "AP split may give birth to new bulk drug hubs in region")
Industry players in the region point out that with Hyderabad becoming saturated, now there was ample opportunity for other coastal regions in the state to emerge as bulk drug manufacturing hubs.
As against the traditional bulk drug hub Hyderabad, the other cities and districts that could stand to gain from the split include Vizag (under Seemandhra), Ongole, Nellore and Krishna.
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Jayant Tagore, president of the Bulk Drug Manufacturers Association (India) said, "With the bifurcation, now districts like Nellore, Ongole, Krishna will have huge opportunities to come up as bulk drug manufacturing hubs in the region. The main infrastructure required for the industry is good connectivity, water and ports to ship the raw materials and products in or out. If Hyderabad could develop as a major hub, despite being a land-locked city, areas near ports like Kakinada and Krishnapatnam will now be looked upon as potential hubs as bulk drug makers would opt to go out of traditional hubs."
Widely touted as the bulk drug capital of India, Andhra Pradesh accounts for nearly 30 per cent of the country's bulk drug production and Hyderabad is the major hub within it. However, owing to pollution related issues, the state government had imposed a ban on the bulk drug manufacturing facilities in the region, which was eventually lifted after several years in mid-2013. Meanwhile, Visakhapatnam, a coastal and port city on the eastern shores, had developed as an alternative hub for making active pharmaceutical ingredients (APIs) or bulk drugs.
With the lifting of the ban, the bulk drug industry in the state feels that there could at least be a 25 per cent expansion in manufacturing capacity around Hyderabad. However, industry insiders pointed out that with the split, Hyderabad and Visakhapatnam would come under two different states, Telangana and Seemandhra respectively, and that would reduce concentration of investments in and around Hyderabad only.
"The Seemandhra region would push for its own hub, and it already has Visakhapatnam as an upcoming bulk drug making hub. Of the total bulk drug making units in Andhra, over 250-260 units are in and around Hyderabad, which constitutes nearly 75-80 per cent of the industry. Visakhapatnam though now has less than 25 per cent share, has a strong port connectivity that could spur additional investments," said a senior official of a local bulk drug firm who did not wish to be identified. He further added, "The Telangana region too would try to identify areas around greater Hyderabad where expansion can happen."
On the whole, the region would stand to gain, feel industry insiders. Andhra Pradesh's bulk drug production had grown from over Rs 19,000 crore in 2012-13 to over Rs 20,000 crore in 2013-14. Apart from pollution issues, the growth rate had slowed down in the wake of agitations and power issues during summer months. Tagore pointed out that last year during summer months, the industry lost around 30 per cent production, thanks to power issues. Moreover, around 30 man-days have been lost in the last few years with the agitation surrounding Telangana.
Ranjit Kapadia of Centrum Broking said, "Last quarter the bulk drug industry in Andhra Pradesh faced some labour issues because of disruptions which in turn can affect production and exports. In such a situation, manufacturers would require to maintain higher inventory to ensure timely dispatches. This raises working capital requirements and may impact margins."
Industry, however, is hopeful that with things looking to settle down, the road ahead should be an easy one. A senior official of Virchow Laboratories said, "While the agitation has definitely impacted the industry, especially, in the last one year, however, with things looking like settling down and more opportunities opening up in the international market, situation is only expected to improve from here."