India's pharma sector, which was dependent on China for a long time, is now getting some relief; the reason is the Atmanirbhar Bharat campaign. It is worth noting that till the year 2000, India's pharmaceutical manufacturing sector was almost completely self-reliant. The essential materials used in drug manufacturing are known as Active Pharmaceutical Ingredients or API. Till the year 2000, the APIs required in the field of drug manufacturing were mostly manufactured in India. There was also necessary competition among their manufacturers in the country, due to which drug manufacturers used to get APIs easily and at a reasonable price in the country. Due to this, the country's pharmaceutical industry was not only thriving, but was also able to provide essential medicines to people around the world at most reasonable prices.
China started destroying India's API sector as part of a conspiracy. The API coming from China started getting dumped in India at very low prices. The result was that India's API industry no longer remained competitive and our API units gradually started closing down. Here's an example: The API of an antibiotic drug Amoxicillin is a derivative of Penicillin-G which was produced in sufficient quantity in India and its international price was about $ 22 per kilogram. But China started dumping this API at less than $ 9 per kg. Due to this, the units making this API in India were forced to close. After that, China started selling this API first at double and then at four times the past price. In the absence of any alternative, the pharmaceutical companies were forced to buy this API at the price fixed by China.
The situation was almost the same for other APIs and many APIs were sold at 10 to 20 times the old price. For example, the price of folic acid, which is used to make vitamin tablets, was increased by more than 13 times. Such was the situation with almost all APIs. The highest increase in prices was seen during the Corona period and the government realised that the revival of the API industry in the country is necessary not only for self-sufficiency in the field of medicines, or to reduce the prices of medicines, but also for health security of the country. It is well known that China has a hostile relationship with India, so China cannot be relied upon for the essential materials required for medicines.
Self-Reliance in APIs
In May 2020, Prime Minister Narendra Modi launched the Atmanirbhar Bharat Abhiyan with the aim of reviving industries whose production was disrupted due to dumping by China and other countries and to promote manufacturing in the country, with an aim to eliminate dependence on foreign countries. APIs were among the 13 categories of goods initially identified for this. One of the important measures adopted for self-reliance is known as Production Linked Incentives (PLIs). It is worth noting that 41 products were included in this PLI scheme for the API sector, with special emphasis on medicines for diabetes, tuberculosis, steroids and antibiotics; and an amount of ₹20,000 crore was proposed for it. The scheme was notified on 21 July 2020.
It is a matter of satisfaction that this scheme has started achieving its goal and the country is moving fast towards self-sufficiency in the field of pharmaceutical industry. For example, the production of Penicillin-G, which was halted in India, due to which Indian industries were forced to pay through their nose for this API, now companies like Aurobindo Pharma Limited, Torrent Pharmaceutical etc. have started their production units for its production. It is believed that Aurobindo Pharma will start production of Penicillin-G API in April 2024 and Torrent by June-July 2024. Health Minister Mansukh Mandaviya says that due to the PLI scheme and other efforts, today India has achieved self-reliance in most APIs, due to which dependence on China has come down. By September 2023, under the PLI scheme, pharma companies had been given investment permission for nearly ₹4,000 crore in APIs and ₹2,000 crore for medical equipment. Apart from this, the Centre has developed three bulk drug parks at a cost of ₹3,000 crore.
Prices have started falling
As positive results of self-reliance in the field of APIs have started coming, the prices of APIs have also started falling. According to pharma industry experts, the prices of APIs have come down by 50% since the time of Covid, out of which the fastest reduction has come in the last two months. It can be understood that when the efforts of self-reliance in the field of API started during the Covid period, now they have started bearing fruits. According to a report, the price of API of popular fever medicine Paracetamol, which had reached ₹900 per kg during the Covid period, has now come down to just ₹250 per kg. Similarly, the price of asthma medicine Montelukast Sodium has come down from ₹45,000 per kg to just ₹28,000 per kg. The price of API of antibiotic Meropenem has come down from ₹75,000 per kg to ₹45,000 per kg.
Experts believe that due to the rise in API production in India, China's drug (including API and intermediate products) cartel has been broken in the last six months. Perhaps China did not realise that India would revive its pharmaceutical industry in such a big way, so it had built additional capacity with a view to capture the pharmaceutical industry of the world. Now due to high capacity, the supply of APIs in China has increased significantly and the reduction in prices is an obvious outcome. It is worth noting that in the year 2021-22, there was a huge increase in the import of API by India. Some increase was also seen in the year 2022-23, but it is also true that India has also exported bulk drug and drug intermediates worth ₹37,853 crore in 2022-23, which is ₹12,302 crore more than ₹25,551 crore worth of their imports in the year 2022-23.
Now that APIs are being produced in large quantities in the country, the falling prices of APIs are indicative of the same. But the government will have to be cautious that the industries that have been re-built due to PLIs, do not fall victims of dumping by China again. The biggest apprehension of the entrepreneurs who have invested under the PLI scheme was about this only. Since China has a large excess capacity, China can again resort to dumping of its APIs in India.
The Indian government, while being vigilant, will have to make every possible effort to stop dumping in the field of APIs by China. This applies not only in the case of APIs but also in the field of other chemicals. According to experts of the chemical industry, two Indian companies named United Phosphorus Limited (UPL) and Hindustan Chemical Limited (HCL) have set up plants at a cost of ₹500 crore with the aim of self-sufficiency in ‘Sodium Cyanide’ in the country. But since these plants have been set up, China, European Union, Japan and South Korea has started using their economic muscles to reduce the landed price of Sodium Cyanide, despite increase in their production cost. This is making production by UPL and HCL economically unviable. Director General of Trade Remedies (DGTR) of Ministry of Commerce and Industry, has proposed anti-dumping duty on imports from China and European Union. But the process of getting such relief for the industry is long and tedious, the country needs to create an expert intelligence agency in the field of international trade so that any such situation of unethical trade practice by foreign countries and their businesses, can be dealt with successfully.
