Gujarat gears up to woo fresh pharma investments as tax havens lose relevance

Already several mid-sized cos have started scouting land; state govt setting up pharma and medical devices park; bets on existing eco-system

With the tax incentives nearing an end in the hilly states and the Goods and Services Tax (GST) paving way for an uniform tax regime across the country, pharma manufacturing hubs like Gujarat have started gearing up to woo investors to the state. For starters, Gujarat is planning to set up a pharmaceutical park in its flagship industrial hub Sanand, about 30 odd kms from Ahmedabad under the Cluster Developement Programme of the Centre.

Plans are afoot to house a medical devices park near Sanand as well and a detailed project report (DPR) has been sent to the Centre. As for the pharmaceutical park, already around 50 hectares of land has been identified. According to a senior government official, “Land parcel near Sanand has been identified, and a proposal has been sent to the Centre requesting funding assistance.” The park would have a common facility center and ready to move in infrastructure, which might lure small and medium sized companies.

Sanand too is located near the pharma manufacturing belts of Changodar, Bavla which houses units of big pharma companies like Cadila Healthcare, Intas, Claris Lifesciences operate their units. The government believes that this would provide a favourable eco-system for SMEs.

State’s deputy chief minister Nitin Patel too had recently said that with the tax incentives nearing an end, Gujarat is keen to attract fresh investments in the pharma manufacturing space. The state already has over 3000 formulations and active pharmaceutical ingredients (bulk drug) manufacturing facilities, and therefore, it has an established eco-system of vendors, machinery, packaging units, logistics, as well as trained manpower.

Gujarat houses nearly 135 licensed medical devices manufacturers in the country, of around 240-250 such companies in the whole country, informed H G Koshia, commissioner, Gujarat Food and Drug Control Administration (FDCA). Experts like Sunil Parekh, strategic advisor to corporate houses such as Cadila Healthcare and Jubilant Group, feel that Gujarat definitely would have an edge over other states when it comes to drawing fresh investments in pharmaceuticals.

“Most of the units that had gone to the hilly states lured by tax concessions are catering to the domestic market. It is difficult to get regulator approvals for these units to export to regulated countries as the eco-system is not well evolved there and companies have faced issues like retaining quality manpower,” he said.

Add to this the advantage of port connectivity, which helps both in importing bulk drugs and export of formulations. “Almost 60 per cent of the formulation requirements of the country is imported from China, and hence logistics here would play a key role,” Parekh said. Gujarat, on the other hand, has over 200 WHO-GMP certified units. This is a significant number given that only about 10-15 per cent of the manufacturing units in the country have WHO-GMP certifications.

Meanwhile, Gujarat FDCA has also started work on training its inspectors on Good Manufacturing Practices (GMP) for medical devices and drugs in line with the training imparted to USFDA inspectors.

Even before the state government started making efforts to improve pharma manufacturing infrastructure in Gujarat, many small and medium companies have started scouting for land here.

 

"In the last one year or so, companies like Corona Remedies (which has already purchased land in Gujarat), Acme Pharma, Zorex Pharma, Rekvina Pharma, Aquila Pharma, Sanjeevani Biotech, Speed Lifesciences, Pharland Healthcare etc have started scouting land in Gujarat," informed a state government official.

The industrial town of Baddi in Himachal which lies at the border of Haryana, had attracted several pharmaceutical units after the subsidy scheme was announced in 2003. According to market estimates, around 360 pharma units had set up shop in the hilly state, attracted by the tax incentives, which included excise duty exemption on finished products, income tax exemption and capital investment subsidy on investment in plant and machinery, among others.

At least 50-60 small, mid-sized and big pharma from Gujarat had moved to Himachal, Uttarakhand and Sikkim to avail the incentives during the period that included Alembic Pharma, Torrent Pharma among others.

As a result, Gujarat had lost some ground as a domestic pharma manufacturing hub. From an over 40 per cent share in domestic pharma production during the early 2000's, the state's share dropped to below 20 per cent in 2010-11 thanks to the exodus of the companies to tax havens. With tax holidays nearing an end, and fresh investments coming into Gujarat ( in terms of new units as well as expansion of existing units), the state's share rose slowly but steadily to around 28 per cent of national production in 2012-13. It is currently estimated to be around 30 per cent of the national pharma production. The Indian pharma industry is pegged at Rs 1 lakh crore.