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COVID-19: Why Is Indian Pharma Overly Dependent On China For Raw Materials?

This post is a part of YKA’s dedicated coverage of the novel coronavirus outbreak and aims to present factual, reliable information. Read more.

The pandemic has brought around unprecedented challenges, both economically and health-wise. It is in these times that we realise our shortcomings and grab the opportunity to reflect upon them in a timely manner.

One such challenge that India is presently facing is the shortage of raw materials required to develop necessary drugs. India depends heavily on imports — over 90% — from China for many key raw materials (mostly intermediates and some active pharma ingredients) that go into the making of at least 15-odd essential drugs.

This news byte was of the year 2014, but nothing much has changed since then. This year, we have faced the same challenge of not only a shortage of API’s (Active Pharma Ingredients) faced by drugs companies but also raw materials used majorly by the chemical industry as a $163 billion industry struggling to reduce its dependency on Chinese imports.

Most API production units in India run at 30% of their capacity, as against China’s capacity utilisation of 70%.

So, why is it that we are overly dependent on China for various kind of raw materials? Why have we not become self-sustainable?

In the case of API’s, it was not always the case as it is right now. We were self-sustainable in the ’90s and were capable of meeting the demand of the industry. But, with an increasing cost of production and lower margins, our API industry could not compete with Chinese API. Most API production units in India run at 30% of their capacity, as against China’s capacity utilisation of 70%. In fact, it is well-documented now that India has already lost its manufacturing base for API to China.

China started focusing on chemicals and the pharmaceutical industry with more vigour and started providing all necessary assistance to its homegrown industries. The assistance was in the form of easy capital, tax holidays or tax breaks, a simple licensing regime, and lesser governmental policy interference. The Chinese focused simultaneously on economies of scale and access to more markets across the globe. Not only did they reduce their cost of production but were also able to supply with fewer restrictions to the foreign market with the help of FTA (Free Trade Agreements) and bilateral agreements.

If we compare, it takes only 6-8 months to set up a factory and start the production of raw materials in China whereas, it takes six years in India to start the same production. The Indian API industry has a complex license renewal system. They are also required to approach various authorities for the renewal of application, according to a report.

Then. the question that arises is, how do we restart the process of claiming growth in our manufacturing sector? Below are a few ideas that have already been suggested by the industry to the government:

1) Ease policy restrictions

2) Simplify licensing

3) Access to easy capital

4) Bi-lateral trade agreement for easier market access

5) Subsidies and tax incentives

The above-mentioned suggestions are generic in nature and can be implemented in a plethora of industries that are grappling to compete globally. There is nothing new in these suggestions, but what we need is action that cannot get delayed any further. Self-reliance is the only solution for job crisis, economic and health crisis, as well as security crisis. It is high time that the government starts looking into self-sustainability more seriously and comes up with implementable solutions.

You must be to comment.
  1. Swati Narang

    Nicely written 👍

  2. Surbhi Narang

    We can also start taking small steps, and reduce our dependency on Chine by not using apps like tiktok, uc browser, pubg, halo, CamScanner, we may take time to setup factories but we are filled with IT professionals and app designers they can definitely do something and design alternative, and all of us can support Indian apps

  3. Megha Sarin

    Very well written article. Perfect analysis. I totally agree we must reduce our dependence on China. Keep posting. Would love to read your insightful articles

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