Manufacturing hubs of medical devices, bulk drugs in offing

Eight proposed parks aim to reduce import dependence, boost local manufacturing

The government has sanctioned the setting up of eight manufacturing parks — four each for bulk drugs and medical devices — to boost local manufacturing and cut back on imports. The idea is to have special purpose vehicles (SPVS) build the necessary infrastructure and get the clearances in place for these parks, where companies can easily plug and play.

A senior official closely involved in the matter said the government gave its inprinciple approval to set up these parks last month. The four bulk drug parks are planned in Andhra Pradesh, Telangana, Himachal Pradesh, and Assam, while the medical devices parks will come up in Andhra, Telangana, Tamil Nadu, and Kerala.

In a meeting with industry stakeholders recently, the Department of Industrial Policy and Promotion (DIPP) expressed that there was a need to boost local manufacturing and reduce the dependence on imports.

Bulk drugs and medical devices are two categories where India is highly import-dependent. India imports 65-70 per cent of its bulk drug requirements, primarily from China. For medical devices, the share

of imports is even higher, at 85-90 per cent.

“The government is trying to expedite the approval process so that work on the ground can begin in the next six months. The respective state governments will provide infrastructure, such as common effluent treatment plants, laboratories for testing, and other basic facilities. SPVS will also get the necessary clearances, including environmental

clearances,” said the official. For bulk drug units, getting environmental clearances is the most difficult part, and SPVS will ensure that, the official added.

The government will also provide a one-time grant of ~100 crore, or 70 per cent of the project cost (whichever is less), for each of the bulk drug parks, and ~25 crore for each of the medical devices parks.

Besides, the Department of Pharmaceuticals is planning to have an interest subvention scheme for formulation (medicine) manufacturers.

“The idea is to boost the micro, small and medium enterprises (MSME) sector in pharmaceuticals, and they need some assistance to upgrade. We are planning to have a scheme whereby the government will bear interest costs of around 6 per cent for any loan taken by these units to upgrade its infrastructure to be Who-gmp-compliant,” the official said.

The government plans to finalise a public sector financial institution to implement the interest subvention scheme. “Banks will do the administrative due diligence and will report to the government before sanctioning the loan,” he added.

An industry representative from the medical devices sector who was present in the meeting said the government was keen to know what could drive investments in these sectors and reduce import dependence.

Rajiv Nath, forum coordinator for the Association of Indian Medical Device Industry (AIMED) and managing director of Hindustan Syringes & Medical Devices, said the import of medical devices had grown from ~23,169 crore in FY15 to ~38,837 crore in FY19. He said that after adding duties (for imported devices) and taxes, the market size for medical devices in India at retail and institute level was estimated at ~1.05 trillion, while domestic production was around ~10,000 crore.

The bulk of the medical devices in India are imported from the US. Nath said there was an investment opportunity of at least ~50,000 crore in the sector if policies were reworked to incentivise traders to manufacture in India. He also said common product grouping was essential for these upcoming parks to succeed and that they did not emerge as threat to the existing clusters. “Gujarat can focus on medical plastic consumables, Kerala on medical rubber consumables and components, Maharashtra on orthopaedic implants, Uttar Pradesh on in-vitro diagnostic device (IVD) reagents. Care has to be taken of not replicating the same product lines and avoid needless competition,” Nath told Business Standard.

For bulk drugs, India is primarily dependent on China, which accounts for 67 per cent of its imports. “The expansion of bulk drug units here was hindered owing to pollution norms. This forced them to focus on high-value and high-margin products to maintain profitability. This has led to overdependence on China for lower-end bulk drugs. Drug companies that are backward integrated too import from China for economic reasons," said an industry insider.