SMEs likely to play important role in pharma growth story: report

Sep 09 2013, 12:32 IST
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Exports of pharmaceuticals products from India increased from USD 6.23 billion in 2006-07 to USD 8.7 billion in 2012-13. Exports of pharmaceuticals products from India increased from USD 6.23 billion in 2006-07 to USD 8.7 billion in 2012-13.
SummaryIndian pharma industry is highly fragmented and estimated to have 9,456 units in SME segment, says report.

supply of active pharmaceutical ingredients (APIs) and finished dosages for Indian as well as foreign pharmaceutical firms, the report said.

MSMEs are often ignored on many occasions. As a result, many of them are today facing a survival crisis. Stringent regulations, lack of financing options, little or no global exposure, poor public image and increasing competition from other low cost nations are some of the crippling factors facing this sector, said R B Smarta, Managing Director, Interlink Marketing Consultancy.

According to him, "there has been a lack of focus by development institutions and financial institutions. On the funding side, bankers seem to have lost focus due to globalisation and norms like the Non Performing Assets (NPA).

"There is going to be a big void of new entrepreneurs entering the sector. The want of focus also results in losing people to IT and non-specific marketing. Similarly, there is a need for establishing and sharing of common facilities like treatment plants and testing facilities."

High Product Registration fee in other developing economies is one of the deterrents to export by SMEs. The industry representatives suggest that the pharma policy on export should provide for a transaction subsidy for the registration fee.

The industry recognises the problems faced by the SMEs, but believes that they have to equip themselves without waiting for external assistance though it suggests that Government initiatives can only be supportive.

"In spite of the stiff competition by thousands of local and national level companies, there are still many opportunities to earn huge profits, the report said.

At present, the government is providing tax deduction to promote R&D, but according to industry experts, this is not sufficient.

Gaurav Khungar of KPMG said, "SMEs can play a strong role in the R&D area. The sector has been asking for various kinds of fiscal incentives and tax sops in order to stimulate investments in innovations and R&D beyond the current tax deduction.

"The tax reduction demands of SMEs are to the tune of 150 per cent on R&D spend, as the current percentage is not enough to stimulate investments in this arena."

"The Government has initiated multiple reforms such as the cluster development programme, technology upgradation fund, credit link capital scheme, amongst others, which have rendered success.

"However, the huge unorganised sector of Micro Small Medium Enterprises (MSME) seeks scaling up of intervention from the Government.

"There's a pressing need for the state governments, local governments to join hand with the Central

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