Upgrade, expand to tap new markets

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: The recent development of a tie-up between the US Food and Drug Administration (FDA) with its Indian counterpart, following the visit of Union health minister to the US, is of great significance. According to reports, the FDA will help Indian drug manufacturers to reach standards applicable in the US. This will open doors into one of the largest drug and cosmetics markets of the world for Indian companies, particularly SMEs. India has the highest number of manufacturing plants approved by US FDA (61 plants), which is next only to that in the US.

The Indian pharmaceutical industry is undergoing fast- paced changes, though not without pains. It has more than 24,000 companies: big, medium and small. Of these, around 300 are in the organised sector, around 16,000 in the SSI sector and the remaining have very small operations. The smaller companies are already reeling under the June 30 deadline for implemention of mandatory Good Manufacturing Practices (GMP) under Schedule-M of the Drugs and Cosmetics Act. SSIs cite lack of resources as a key reason for their inability to upgrade to prescribed standards. Barely 1,000 SSIs would have geared themselved up for meeting the deadline. But there seems little option. Further, the government is establishing a National Drug Authority, an independent body on the lines of the Telecom Regulatory Authority, which will further tighten the quality and process standards for the drug industry.

The industry produces about 60,000 finished medicines and roughly 400 bulk drugs, used in the formulations. India is one of the top five producers of bulk drugs in the world. Pegged at $6 billion, the domestic market is not growing enough, but the international market is extremely promising. As reported in Scrip World Pharma News(UK), India ranks 4th in the world, accounting for 8% of world’s drug production by volume and 1.5% by value, but still ranks 17th in terms of export value of bulk actives and dosage forms. Exports have been growing by 30% per annum during the past 5 years, and constitute almost 40% of the total production in India. This is to be further triggered by the fact that generics worth over $40 billion are going off patent in the coming few years, which is close to 15% of the total prescription market of the US.

It is estimated that yoga alone is a flourishing $27 billion-a-year business in the US. With Indian alternative system of medicines gaining growing acceptance world wide, ayurvedic, unani, sidha, homeopathic and traditional systems of medicines open up a huge opportunuity that could be tapped by Indian companies. Therefore, there is a significant opportunity for SMEs that are willing to upgrade and exapand.

I have a business in Nasik. I have an unresolved query regarding my product Plaster of Paris (made of gypsum). In Schedule C i.e. the 4 % Vat list, item No. 41 is ‘Gypsum of all forms & descriptions.’ Does my product come under this? In the industrial input list, its name ‘Dehydrated

Calcium Sulphate’ has not been included. There’s much confusion, as traders are charging 12.5% Vat in Mumbai, but 4% in Nasik. What should I charge? I had also raised this point in Vat’s website queries, but have received no reply. I request you to let me know so I can charge correct rate.

— Jay Patel, Nasik

You are right, the position of Plaster of Paris is not clear from the Vat schedules of Maharashtra. An official clarification would be needed from the Mahrashtra Vat Deptt. However, keeping in view that Schedule C contains industrial inputs and Plaster of Paris could be used both for industrial and household purposes, it appears your Mumbai counterparts may have opted for the right approach by charging 12.5% rate.

Could you please clarify the investment limit proposed for small and medium enterprises in the SME Develoment Bill, which was introduced in Parliament recently? Is there any major addendum to the earlier draft?

—Ashok Gupta, Kolkata

The Bill has proposed the expansion of the definition from the currrent Small-Scale Industries (SSIs) to Small and Medium Enterprises (SMEs). For small enterprises, it has proposed an investment limit of Rs 5 crore in case of manufacturing and Rs 2 crore for services, up from the present Rs1 crore and Rs 10 lakh, respectively. It proposes investment limit up to Rs 10 crore for medium manufacturing units and up to Rs 5 crore for service units; medium enterprises were not defined earlier.

The Bill seeks to provide some teeth to the proposed National Small and Medium Enterprises Development Board, granting it the legal authority to seek information from any institution or entity with regards to its mandate and penalise the defaulters. The Bill proposes to subsume the Interest on Delayed Payments to Small-Scale and Industrial Undertakings Act ’93, and tightens the provisions of the erstwhile Act substantially. For example, it has proposed that to appeal against the order of the facilitation councils (quasi-judicial entities framed under the previous Act in states), 75% of the amount will have to be deposited.