The commerce ministry has asked the Export and Import Bank of India (Exim) to work out a suitable loan package to suit the needs of the small- and medium-scale exporters in the pharmaceutical sector. This will be over and above the general market access and focus market schemes the ministry has extended to the sector.
Officials said on Thursday that it is typical of the pharma sector to gain 70 per cent growth in exports from top 20 companies. The rest of the sector comprises small firms that do have a potential for exports but are suffering from the bottlenecks of infrastructure facilities and financing.
The ministry is basically interested in arranging finance for the SMEs in pharma sector. This will be not only for marketing products and exporting, but for building strong research and development that is currently domain of the top companies, the officials added.
For these capital-intensive needs, the balance sheet of the companies will have to be restructured so as to avail bank loan. To address such needs, Exim bank can provide short-term working capital or bridge loan assistance suiting both the needs of the companies and Exim’s own profile. Basically, the ministry and the bank are working funding possibilities for small industries investment possibilities.
Currently, Exim has a line of credit that does not suit many SMEs. All the same, banks shy away from financing such exporters. Industry sources say the SME pharma sector in the country is facing serious financing problems due to the methodology being adopted by commercial banks in fixing the loan limit.
Banks deny export credit to SME sector on the pretext of volatile condition in the target market . Banks also deny export credit to SME sector seeking more collateral guarantees.
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Faced with severe financing issues, the pharma exporters have been demanding a separate line of credit as in the form of foreign currency-packing credit by banks for the SME sector.
Also, they want the cover of ECGC to be taken as guarantees by banks, an official with exporter body stated. In their meetings with commerce ministry, the exporters have also suggested that the banks should be liberal in financing for focus areas identified in the foreign trade policy announced by the Union commerce ministry.
Besides, the exporters have been demanding that one-fourth of Exim Bank line of credit should be earmarked for the SME sector.
The exporters also demanded tax exemption part from 50 per cent reimbursement of bioequivalence studies. Among other suggestions of the exporters to further promote pharma export are to provide a technical person in the embassies of at least the important markets so that importers can promptly sort out technical difficulties.