Pharma sector SMEs seeks government support

The Indian Pharmaceutical industry has been witnessing phenomenal growth in recent years, driven by rising consumption levels in the country and strong demand from export markets. The pharmaceutical industry in India is estimated to be worth about $10 billion, growing at an annual rate of 9 percent. There are around 10,000 pharmaceutical manufacturers in India, producing bulk drugs and formulations, of which some 7,000 are SMEs, contributing 35 percent of the total domestic turnover of Rs 45,000 crore.

In order to enhance the performance in the domestic and export markets, the small and medium enterprises (SMEs) in the pharma sector are looking for government support on technology upgrade in manufacturing, brand promotion and marketing. The marketing and regulatory constraints are putting pressure on SMEs growth. To overcome this, the SMEs need financial support from the government. The opportunity is mainly in contract manufacturing, for both MNCs operating in India and Indian companies, which are looking to outsource manufacturing activities for the domestic market and focus on exports to regulated markets like the US and Europe. For which the SMEs first have to upgrade their capabilities to comply with manufacturing standards like Good Manufacturing Practices (GMPs) set by the Indian government and the World Health Organization (WHO).

Upgrading facilities according to the WHO-GMP and Indian GMP standards needs liberal funding from the government and some financial incentives, but without so many restrictions. The government has implemented financial assistance programmes like the Credit Linked Capital Subsidy Scheme (CLCSS) for technology up gradation of small-scale industries to enable them to comply with GMP standards with the revised Schedule M norms under the Drugs and Cosmetics Act. Besides, the government also announced a Pharmaceutical Technology Upgradation Assistance Scheme (PTUAS) that provides a 5 percent interest subsidy for SMEs to upgrade their facilities to WHO-GMP standards.

The SMEs also face the challenge of eligibility barriers, including fixed turnover limits and ORG rankings set by institutional buyers in their bidding process for medicine procurement. Small enterprises, which mainly rely on government and institutional supplies, could perform well if these restrictions are removed. Further, the government could also provide SMEs with soft loans for brand promotion.

The MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. The contribution of SMEs to pharmaceutical units, output, investment, and employment is considerably higher than many other sectors. In the year 2011-12, the Indian domestic pharma market is expected to grow at a compounded annual growth rate (CAGR) of nearly 16%. Export market is also expected to grow much faster than the domestic market.