Sequel to lack of incentives and unreliable power supply

Tax disincentives and unreliable power supply have led to flight of units and putting investments to the tune of over Rs.2,000 crore in the Jawaharlal Nehru Pharma City, Parawada, on hold.

Despite a representation from the Prime Minister of Japan, the pleas of pharma units were not considered favourably. Now, with the bifurcation becoming a reality, pharma unit managements are hoping that it will augur well for them.

Of 12 big companies who took land in the JNPC, only five have started production. The introduction of Minimum Alternate Tax (MAT) came as a big jolt for the units operating in the SEZ.

There are flight of investments to Maharashtra, Gujarat, and Tamil Nadu. Lupin set up a unit in non-SEZ area of the JNPC but due to power problem and MAT, it shifted unit to Nagpur. Teva, an Israeli firm conducted survey in the area but finally took the decision to locate its unit worth Rs.500 crore in Anand.

A dream

In 2013-14 the estimated exports was to the tune of $14-15 billion. The country’s target is $25 billion by 2014-15, which will remain a dream unless there are proactive measures to encourage places like Visakhapatnam having potential to become a hub, Sanjit Singh Lamba, managing director of Eisai Pharmatechnology and Manufacturing Pvt. Ltd has told The Hindu in an interview.

Over past few years, specific promises made to the pharma sector remained only on the paper. Raw material is a problem and mostly imported from China as basic drugs are being developed by Mylan and Aurobindo. Advantages are being cornered by China as most units in India are hit by cost pressure.

Mr. Lamba has said power is cheap in East Europe and China where as power holidays and outages apart from high cost of supply have affected the production and margins. He has said when they started their unit in 2007 the landed power cost was Rs.4.5 per unit. Now it is almost doubled with no reliability in supply. Power through DG sets costs Rs.11 to Rs.12 per unit.

As Hyderabad is already saturated, Mr. Lamba expects that there is a lot of scope for Greenfield as well as Brownfield pharma units. Clusters have already developed at Nakkapalli in the district and Pydibhimavaram and Ranasthalam in Srikakulam. Apart from stable supply of power, incentives like excise and IT benefit are sought by the investors.

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