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Gujarat, considered amongst the major pharmaceutical hubs in the country, is having a tough time increasing its share in overall domestic pharma production in the country. During the first half of the current fiscal, the state's share in domestic production has not grown, while exports from Gujarat seem to be on growth curve.
According to initial estimates, Gujarat produced pharmaceutical products worth Rs 8,500 crore during the first six months of the fiscal.In terms of share in national production, it is around 28 per cent. The state had ended the last fiscal with a 28 per cent share of domestic pharma production. If one compares with the year before period as well (i.e first half of 2012-13), the state's share was at about 27-28 per cent of domestic production, claimed industry associations here.
Chirag Doshi, chairman of the Gujarat State Board of the Indian Drug Manufacturers Association said, "As far as Gujarat's share in overall pharma production in the country goes, it is at the same level so far this year. It is roughly around 28 per cent of net domestic production. Exports, on the other hand, have shown some growth. While at the end of last year, Gujarat's share in national exports was around 24-25 per cent, it is growing, and is currently around 27-28 per cent." He, however, added at the same time that the official figures are yet to be collated.
According to industry estimates, Gujarat had exported pharma products worth Rs 12,000-13,000 crore last fiscal, and its production for the domestic market was around Rs 15,000 crore. During the first six months of the 2013-14 fiscal, the domestic production from the state was around Rs 8,500 crore while exports were at around Rs 7,000 crore.
There are two prime reasons behind this trend; one Gujarat based companies are increasingly focussing on exports for better margins, and secondly, the state is yet to recover fully from the production lost to hilly states which offer tax benefits.
Gujarat's share in national pharmaceutical production was over 40 per cent during the early 2000s, however, following an exodus of companies to tax free havens of Himachal Pradesh, Uttarakhand and Sikkim, the share fell to below 20 per cent in 2010-11. It has managed to climb up to 28 per cent now, however, the state is yet to regain its lost position.
As Doshi puts it, "Tax benefits in many of these states will end starting from March 2015, and post that we expect to see a steady rise in Gujarat's share in domestic pharma production, as many companies are likely to make a comeback." He explained further that the cost of production in these hilly states is higher by around 15 per cent, owing to higher manpower costs and other issues. "Companies are facing issues to find skilled manpower, transportation issues etc. Once the excise benefit ceases, most companies would opt to come back," he said. As many as 50 companies had moved out of Gujarat to these tax free havens, Doshi claimed.
Companies like Corona Remedies, which has a manufacturing facility in Solan in Himachal Pradesh, is waiting for the goods and services tax (GST) regime to take a call on its future expansion plans. Nirav Mehta, director, Corona Remedies said, "We have taken up a piece of land at Changodar (at the outskirts of Ahmedabad), but we are yet to take a call on when to start work on the facility. We want to have more clarity on the upcoming GST regime before we park in our investment as tax considerations are an important part of any investment decision. Once the GST is implemented, we would like to stay in our home state Gujarat rather than venturing out."
It has a manufacturing facility in Solan in Himachal Pradesh, where it has recently augmented the production capacity to two million tablets per day per shift and 60,000 bottles (200 ml) per day per shift. It makes formulations like anti-biotics and hormones and markets them under the Corona brand.
Similarly, there are companies like Finecure Pharma, which have already decided on having their expansion work here in Gujarat. The company, which has an unit in Himachal which started operations six years back, has decided to invest close to Rs 25 crore in setting up a formulations making unit at Bavla as the tax holidays are ending soon. Future expansion plans of local pharma companies are likely to be in Gujarat itself, feel industry insiders. Alembic Pharma, a Vadodara based pharmaceutical major, had set up a manufacturing facility at Himachal some years back. R K Baheti, director, finance of Alembic says, "The Himachal unit is functioning properly, and we have no plans to cut down on production there. However, as far as expansion is concerned, we are in the process of expanding our Vadodara plant only."
As for the state's share in exports rising, Gujarat-based small and medium pharma companies have started focussing on exports apart from the big names like Torrent Pharma and Cadila Healthcare. While the pharma majors focus on regulated markets like the US and the EU, mid-sized companies are trying to crack relatively easier markets like those in Latin America.
Export markets offer better margins than domestic sales, said V Shah of Saga Laboratories, which exports oral dosage forms to countries in Africa, Latin America and the Commonwealth of Independent States (CIS).
According to initial estimates, Gujarat produced pharmaceutical products worth Rs 8,500 crore during the first six months of the fiscal.In terms of share in national production, it is around 28 per cent. The state had ended the last fiscal with a 28 per cent share of domestic pharma production. If one compares with the year before period as well (i.e first half of 2012-13), the state's share was at about 27-28 per cent of domestic production, claimed industry associations here.
Chirag Doshi, chairman of the Gujarat State Board of the Indian Drug Manufacturers Association said, "As far as Gujarat's share in overall pharma production in the country goes, it is at the same level so far this year. It is roughly around 28 per cent of net domestic production. Exports, on the other hand, have shown some growth. While at the end of last year, Gujarat's share in national exports was around 24-25 per cent, it is growing, and is currently around 27-28 per cent." He, however, added at the same time that the official figures are yet to be collated.
According to industry estimates, Gujarat had exported pharma products worth Rs 12,000-13,000 crore last fiscal, and its production for the domestic market was around Rs 15,000 crore. During the first six months of the 2013-14 fiscal, the domestic production from the state was around Rs 8,500 crore while exports were at around Rs 7,000 crore.
There are two prime reasons behind this trend; one Gujarat based companies are increasingly focussing on exports for better margins, and secondly, the state is yet to recover fully from the production lost to hilly states which offer tax benefits.
Gujarat's share in national pharmaceutical production was over 40 per cent during the early 2000s, however, following an exodus of companies to tax free havens of Himachal Pradesh, Uttarakhand and Sikkim, the share fell to below 20 per cent in 2010-11. It has managed to climb up to 28 per cent now, however, the state is yet to regain its lost position.
As Doshi puts it, "Tax benefits in many of these states will end starting from March 2015, and post that we expect to see a steady rise in Gujarat's share in domestic pharma production, as many companies are likely to make a comeback." He explained further that the cost of production in these hilly states is higher by around 15 per cent, owing to higher manpower costs and other issues. "Companies are facing issues to find skilled manpower, transportation issues etc. Once the excise benefit ceases, most companies would opt to come back," he said. As many as 50 companies had moved out of Gujarat to these tax free havens, Doshi claimed.
Companies like Corona Remedies, which has a manufacturing facility in Solan in Himachal Pradesh, is waiting for the goods and services tax (GST) regime to take a call on its future expansion plans. Nirav Mehta, director, Corona Remedies said, "We have taken up a piece of land at Changodar (at the outskirts of Ahmedabad), but we are yet to take a call on when to start work on the facility. We want to have more clarity on the upcoming GST regime before we park in our investment as tax considerations are an important part of any investment decision. Once the GST is implemented, we would like to stay in our home state Gujarat rather than venturing out."
It has a manufacturing facility in Solan in Himachal Pradesh, where it has recently augmented the production capacity to two million tablets per day per shift and 60,000 bottles (200 ml) per day per shift. It makes formulations like anti-biotics and hormones and markets them under the Corona brand.
Similarly, there are companies like Finecure Pharma, which have already decided on having their expansion work here in Gujarat. The company, which has an unit in Himachal which started operations six years back, has decided to invest close to Rs 25 crore in setting up a formulations making unit at Bavla as the tax holidays are ending soon. Future expansion plans of local pharma companies are likely to be in Gujarat itself, feel industry insiders. Alembic Pharma, a Vadodara based pharmaceutical major, had set up a manufacturing facility at Himachal some years back. R K Baheti, director, finance of Alembic says, "The Himachal unit is functioning properly, and we have no plans to cut down on production there. However, as far as expansion is concerned, we are in the process of expanding our Vadodara plant only."
As for the state's share in exports rising, Gujarat-based small and medium pharma companies have started focussing on exports apart from the big names like Torrent Pharma and Cadila Healthcare. While the pharma majors focus on regulated markets like the US and the EU, mid-sized companies are trying to crack relatively easier markets like those in Latin America.
Export markets offer better margins than domestic sales, said V Shah of Saga Laboratories, which exports oral dosage forms to countries in Africa, Latin America and the Commonwealth of Independent States (CIS).
