MP drug firms find WTO norms too hot

Madhya Pradesh small-scale drug manufacturers are in trouble. The long-awaited revised Schedule M of the Good Manufacturing Practices (GMP) (as per the WTO ruling), which came into effect from July 1, makes it mandatory for the units to upgrade facilities, which, according to most of them, would cost a sum of Rs 1-1.5 crore each.

This is an attempt to bring these small manufacturing facilities to international standards.

The schedule gives general and specific requirements on factory premises and materials, plant and equipment, and minimum areas required for manufacturing certain categories of drugs.

As Madhya Pradesh small-scale drug units are paying excise duty based on maximum retail price at 4 per cent and the value-added tax at 9.2 per cent, the new rules, they feel, will take the bottom out of such units.

According to an industry source, "The Madhya Pradesh Drug Controller, who has now shifted to another department, had slapped notices on a number of small-scale units and orders have been issued for discontinuing government purchases from those SSIs that do not comply with Schedule M."

Madhya Pradesh SSI units have a role to play in making the big pharmaceutical firms competitive worldwide in terms of pricing since they supply them life-saving drugs.

There are 350 small-scale units in Indore itself, with a combined turnover of not less than Rs 450 crore. But for these companies, poor credit or cash flow is the major hurdle in implementing the mandatory "Good Manufacturing Practices" under Schedule M of the Drugs and Cosmetics Act.

Owners of small firms in Madhya Pradesh say lack of resources has been the key reason for their inability to upgrade to the prescribed standards. "Barely 20 of the SSIs of the state could have been ready to meet the deadline," a small-scale drug manufacturing unit owner in Govindpura, Bhopal, told Business Standard on conditions of anonymity.

A number of small-scale units had asked for an extension of the deadline for the implementation of Schedule M, which had been extended twice.

"We are demanding a corpus or a fund like the one given to the textile and engineering units to upgrade their units. In the absence of funds or credit, it would not be simple for small-scale units to comply with the norms in the state and they are now facing stern action that can bar them from manufacturing and supplying drugs," R S Goswami, president of the MP Laghu Udyog Sangathan, told Business Standard.