India has emerged a key supplier of generic and affordable medicine for the world market. But India should be worried about the fact that it depends overwhelmingly on China for crucial raw material, known as Active Pharmaceutical Ingredients. In fact 65 per cent of the key raw material comes from China.
This is disconcerting, according to an Assocham-RNCOS joint paper, given the larger narrative of reducing trade gap with China, which is well over $51 billion.
"Over-dependence on China for APIs is likely to affect the bulk drug manufacturing sector, and subsequently have an impact on our population in plausible scenarios of drug shortages brought down by interrupted imports from single source country," ASSOCHAM Secretary General Mr D.S.Rawat said, adding over-dependence on such a crucial raw material on a single country is also not advisable from India's overall strategic interests as well.
Though the government has taken steps like withdrawal of exemption in customs duties, imports worth Rs 13,853 crore in 2015-16 or 65.29 per cent of the total imports of Rs 21,216 crore, is not sustainable.
One of the main reasons for huge API imports from China is the low cost of its manufacture and subsidy in China, while India levies negligible import fee. "The import fees should be increased in line with other counterparts," the paper said.
The chamber suggested that the Centre focus on development of mega parks for APIs across the country. These parks should be provided with common facilities such as effluent treatment plants, testing, power plants, IPR management and designing. These facilities should be maintained by special purpose vehicles.
Several other countries, like China, provide incentives and subsidies for promoting the manufacture of essential pharmaceutical raw material. This significantly reduces their cost of production and ability to supply API to the world market at a huge discount to the global prices. This discourages new domestic investment in the sector.