In early 2009 Mumbai-based pharma major Unichem Laboratories was in a fix over its expansion plans. The company’s existing plants at Goa, Ghaziabad and Baddi were already running at full capacity. Acquiring additional land in these places would have meant a pretty high investment. Sikkim was the potential destination, the company began to evaluate. In 2010, in little more than a year, an ultra-modern formulation plant of Unichem Laboratories became operational at a minimal investment of Rs 30 crore.
Opportunity for pharma majors
Indian pharma companies are now using the concept of multi-locational facilities to get Return On Investment (ROI) in the shortest possible time. Unichem is not alone now. More than a dozen pharma companies like Cipla, Sun Pharma, Zydus Cadila, Alembic, IPCA, Alkem Lab, Intas Pharma, Torrent Pharma and of course, Unichem have set up base at Sikkim to maximize the benefits of the new North-East Industrial and Investment Promotion Policy (NEIIPP), 2007 which come with a 10 year tax exemption from the date of commencement of commercial production. In case of Sikkim, there’s 100% excise duty exemption on finished products manufactured there, 100% exemption on income tax, capital investment subsidy of 30% on the investment in plant and machinery, interest subsidy at 3% on working capital loan and even reimbursement of 100% insurance premium. Labour, power and overall cost of manufacturing in Sikkim is already lower when compared to states like Gujarat and Maharashtra. And to top it all, Sikkim also offers attractive freight subsidy. These are the reasons, why of late, pharma giant Lupin is also evaluating the state.
Today, Sikkim is home to 14 major pharma companies with significant investments in the state. By early 2010, Sikkim had already attracted pharma investment upwards of Rs 2,500 crore. After Gujarat, Goa and Baddi, Sikkim is the next hotspot for pharma majors. This could have big implications given the fact that India is world’s fourth largest producer of pharmaceuticals by volume. On the part of pharma companies, having multi location plants prevents over dependence on one site.
Ramesh Kumar, who heads the Cipla plant at Sikkim said to a newspaper in 2009, “Sikkim is a peaceful state and has huge potential for the manufacturing sector. There is minimal interference by the state government. It’s true the state took some time to develop and attract the pharma companies. But now it is surely at a tipping point,”. Cipla has gone on stream in Sikkim since April 2008.
“The new North-East Industrial and Investment Promotion Policy, 2007 is highly beneficial for pharma Investments in Sikkim. The State is not known for issues like labour unrest. The pollution free atmosphere is absolutely conducive to pharma investment. There could not have been a better situation,” said Prof. Prakash V Mallya, director, Centre for Pharmaceutical Professional Advancement, Krupanidhi Institutions, Bangalore.
The big advantage that companies are viewing in Sikkim is the ability to be able to invest in a Greenfield project complying to Good Manufacturing Practice(GMP). The design concepts for GMP can be incorporated the latest technology and equipment in the beginning itself, thus avoiding the problem of trying to change the traditional plant design.
Opportunity for Sikkim
In case of Baddi in Himachal, the pharma sector made a beeline around 2004-05 to cash in on the tax incentives. Within years, as many as 180 pharma units set up base in Baddi. Right now, tourism industry is the key revenue generator for the Sikkim exchequer. If Sikkim can redo a Baddi, the state will be sitting on a pile of cash. Sikkim is offering huge benefits. But despite attractive benefits, poor marketing is a handicap which Sikkim has been suffering from. And it is here that Baddi had scored trumps.
Hiccups
There remain a few hiccups though, especially trained manpower. There is only one pharmacy college which companies will need to approach for candidates and invest in training. Pharma manufacture also need the support of ancillary units like packaging, access to raw materials, components, machinery etc.
According Kaushik Desai, chairman, Industrial Pharmacy Division, Indian Pharmaceutical Association, although the logistics and access to trained manpower are an issue, pharma majors have opted to invest in Sikkim. This is because of financial gains, they can garner from these investments at a faster pace from tax savings.
Concerns
In the Himalayan state of Sikkim, environment is a big concern. And rightly so when the drug majors pay scant regards in exploiting natural resources and run away at the first opportunity of a tax haven. Gujarat, till just a few years ago, manufactured almost 42% of country's drugs. With Baddi coming up, Gujarat's share dropped down to 20%. Now, with Sikkim giving tax breaks, the companies are rushing here.
They will pollute the water, the air and the greenery, enjoy tax benefits and when another tax haven comes, will relocate there. Sikkim can ill afford to have such generous policies to the detriment of its natural identity. Companies are welcome to Sikkim but we can't let Sikkim and its rivers be a dumping ground for these pharma majors. The government of Sikkim needs to put strict regulations to not let Sikkim's natural beauty, cleanliness and purity dilute for short term profit.
The article has been published on iSikkim.com
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