Commerce ministry asked EXIM to work on suitable loan package for Pharma SMEs

14 Oct 2011 Evaluate

The Export and Import Bank of India (EXIM) has been asked by the commerce and industry ministry to work on a suitable loan package to meet the requirements of the Small and Medium scale exporters in the pharmaceutical sector. This will be besides the general market access and focus market scheme the commerce ministry has extended to the sector.

The commerce ministry official said 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.

By adding further the official said that 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.

To meet these capital intensive needs, the balance sheet of the companies will have to be restructured so they SMEs can get the loans from banks. To meet the such requirements, the EXIM bank could offer short-term working capital or bridge loans assistance suiting both the needs of the firms and EXIM’s own profile. Mainly, the ministry and EXIM are looking for funding possibilities for small industries investment possibilities.

Presently, EXIM has a line of credit which does not suit many SMEs, and banks hesitate in financing such exporters. Experts from the SME Pharam sector in India is facing serious funding problems because of the methodology being used by the commercial banks in fixing the loan limits.

The commercial banks deny export credit to SME sectors on the pretext of volatile condition in the target market. Banks also deny exports credit to SME sectors seeking more collateral guarantees. Because of all these issues, the SME Pharma exporters have been demanding a separate line of credit as in the form of foreign currency-packing credit by commercial banks for the SME sector.

The SME sector also wants to cover of ECGC to be taken as guarantees by banks. The exporters has 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. Along with this, the exporters have also demanding that the one-fourth of EXIM banks line of credit should be earmarked for SME sectors.

The exporters are also demanding tax exemption part from 50% reimbursement of bioequivalence studies. Among the other recommendations of the exporters to promote Pharma exports are to give a technical person in embassies of at least the important markets so that importers can promptly sort out technical difficulties.

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