With the West Asia conflict taking a toll on the pharma sector, the lobby body Confederation of Indian Industry (CII) has asked the department of pharmaceuticals (DoP) to provide relief to the industry suffering from rising costs, shipment delays and operational disruptions.
In a letter, CII has urged the government to give targeted freight subsidies or reimbursement schemes for pharma exports to conflict-affected West Asian markets, with special focus on MSMEs, to neutralise abnormal increases in freight and insurance costs.
Logistical Nightmares
The West Asia conflict is raising freight, insurance, and operational costs for pharma exporters. The freight charges have doubled to $4,000-8,000 per shipment as sea routes have been affected, and the cargo ships are forced to take alternative routes which is leading to delays and higher insurance premia.
Besides logistical challenges, the conflict has also pushed the manufacturing cost for drugmakers. As per CII, the vessel shortages and rerouting are affecting the movement of
active pharmaceutical ingredients (APIs) and key raw materials from China with prices of several APIs rising by about 30% or more in a short span.
The industry fears that if input costs continue to rise and logistics remain disrupted, manufacturers might struggle to sustain production for both domestic and exports market.
“The crisis has triggered a sharp rise in crude oil prices, which has cascaded into significant cost increases for petroleum derived solvents and chemical intermediates. This raises production costs and may undermine the competitiveness and continuity of export supplies,” the CII noted.
Department of Commerce data shows that India exported pharma products worth $911.9 million in 10 West Asian countries in FY25 with the biggest markets include United Arab Emirates, Saudi Arabia, Yemen and Oman. Despite just about 3% share of the total pharma exports, the region have witnessed significant demand growth in the last few years for Indian generics.
Regulatory Flexibility
Crucially, the CII has asked the government to consider time-bound relaxations in the drugs pricing norms. The National Pharmaceutical Pricing Authority (NPPA) controls medicine prices by fixing ceiling prices for essential medicines through a list — National List of Essential Medicines (NLEM). For non-essential medicines also, NPPA has put a cap of 10% annual price increase.
On March 19, the government introduced Rs 497-crore RELIEF (Resilience & Logistics Intervention for Export Facilitation) scheme that offers risk coverage up to 100% for shipments between February 14 and March 15, and up to 95% for shipments between March 16 and June 15, along with partial reimbursement of freight and insurance surcharges (up to 50%) for eligible MSME exporters.
The industry body has asked support measured tailored to the bulk drug sector, and explicit prioritisation of pharma, within RELIEF’s coverage framework.
Additionally, since the MedTech sector is also experiencing an unprecedented logistics disruption, CII has asked the government to rationalise the customs duty temporarily, GST relief on international freight, prioritising the ‘green channel’ clearance, etc.