Pharma City likely to boost life into drug industry

HYDERABAD: The 11,000-acre Pharma City proposed by the government of Telangana is likely to give a much-needed fillip to the ailing bulk drugs and chemical industries in the city.

Industry experts say if the infrastructure creation takes off as planned, it will attract homegrown large pharma companies and multi-nationals to set shop in the city. As per estimates, about 70,000 jobs will be created, besides attracting large investments.

'We are hoping to get clarity from the government sometime next week. The concept will get a boost based on how quickly the government will be able to get environmental clearance (EC) from the Union Ministry of Environment and Forests (MoEF),' says Srinivas Reddy, managing director, Hetero Drugs Ltd.

Typically, it will take a little over two years for a pharma company to get an EC on a standalone basis.

But in a concept like Pharma City, if the State government gets EC for the entire land earmarked under manufacturing, individual companies can then apply for EC from local offices.

'This will reduce the time to 3-4 months,' says Reddy, adding that Hetero is open to exploring buying land at the Pharma City. ' This will be for our expansion in 2017-18, but all will depend on the infrastructure created,' he adds.

Currently, Hyderabad accounts for a fifth of the country's exports of drugs, which stood at Rs 90,000 crore in 2013-14. The city is home to several leading pharma majors, including Dr Reddy's Laboratories Ltd, Mylan Laboratories (which acquired city-based Matrix Laboratories), Divis Laboratories and Natco Pharma Ltd.

Hyderabad is also known as the bulk drugs capital of India, with more than 450-odd bulk drugs, intermediaries and chemical industries operating in the city with an average size of Rs 5 crore to Rs 45 crore.

'This will fuel industrialisation and give reprieve for bulk drugs and formulations industry. But being a land-locked area, the cost of effluents discharge could be higher,' says M Goutam Reddy, MD, Ramky Group, which operates a pharma SEZ in Vishakapatnam. The SEZ set up in 2,300 acres, of which 1,400 acres is plotted for companies, houses 45 operational units and another 37 in construction phase.

United Andhra Pradesh accounted for over 30 per cent of the country's bulk drugs production and over 70-75 per cent of it was from Hyderabad. Combined AP's bulk drugs production grew from over Rs 19,000 crore in 2012-13 to over Rs 20,000 crore in 2013-14.

'Though the city has several companies, we are facing a severe challenge from the Pollution Control Board (PCB), which is still following old rules and regulations,' explains NV Narender, general secretary, Telangana Association for Pharma and Chemcial Industries.

For instance, if a company secured a licence during inception for the production of certain bulk drugs and intermediaries, even after several years of its operations, PCB forces them to continue with those substances irrespective of whether if its viable or not.

'Often, it's not be feasible for companies to stick to the substances with which they have started operations. Those not failing to include those substances are issued closure notices,' he says adding, about 90 per cent of the 450-odd companies have got notices at some point of time.

'Once you get a notice, it will take more than six months to 1 year or more to revive operations. Those who cannot overcome, are forced to sell to large companies,' he says.

Also, bulk drugs firms are currently concentrated in the hitherto unpopulated industrial areas like Balanagar, Bollaram, Jeedimetla, Phashamylaram, Uppal Industrial area and Mallapuram. They are now part of the city and hence are subject to even stringent PCB norms.

Eventually, companies may have to shift from existing facilities in order to meet PCB norms. 'But it's expensive to find land in the city as per acre is priced upwards Rs 1 crore. An upcoming concept like Pharma City will give us access to land as economical as Rs 10-14 lakh per acre,' says Narender. In September, the association sought 2,000 acres from the government to facilitate expansion.

According to a senior official of Aurobindo Pharma Ltd, the move to create dedicated infrastructure for the pharma companies will take the sector to its next level of growth.

In 2011, the Ministry of Commerce embarked on an ambitious strategy to double xports from $10.4 billion in 2009-10 to $25 billion by 2013-14, but exports registered the slowest growth in at least 15 years at 1.2 per cent to $14.84 billion in FY14.

Indian pharma companies account for over 10 per cent of the total US generics market, pegged at about $30 billion. 'If we were to contribute more, support from the government will help us achieve growth,' he says.