SMEs play crucial role in growth story of pharma industry: Report

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SME Times News Bureau | 10 Sep, 2013
The Micro, Small and Medium Enterprise Report Monday said that the small and medium enterprises (SMEs) have played a crucial role in the growth story of the Indian pharmaceutical industry, reports media.

"Small and medium scale units have played a crucial role in the growth story of the Indian pharmaceutical industry and form an integral part of the sector," India Micro, Small and Medium Enterprise Report 2013 said, released in Mumbai on Monday.

It added: "The Indian pharmaceutical industry is highly fragmented and estimated to have 9,456 units in the SME segment, which account for around 87 percent in production by volume and 40 percent by value."

Exports of pharmaceuticals products from India increased from USD 6.23 billion in 2006-07 to USD 8.7 billion in 2012-13, a combined annual growth rate of 21.25 percent. The Ministry of Commerce has targeted Indian pharma sector exports to reach USD 25 billion by 2014 at an annual growth rate of 25 percent.

In terms of number of units and employment generation, the SME sector is at the forefront. They also support 48 percent of the country's pharma exports, the report said.

The country's pharmaceutical sector derives its strength from the SME sector, as it forms an essential part of the supply chain for the larger players.

There are more than 24,000 registered units, which meet 70 percent of the country's needs. Clearly, MSMEs operating in the domestic pharma sector are recognised as the backbone of the industry.

By and large, they operate in the local market, and mainly manufacture formulations which relate to medicines of mass consumption and therefore have a huge market. To a great extent, survival of these units would depend on how well and quickly these companies are able to adapt to the changing business scenario, the report said.

In India, SMEs are mainly focusing on manufacturing and niche marketing. Contract Research and Manufacturing (CRAMs) and Biopharma have emerged as areas of high relevance to the MSME sector. It is recognised that the MSME units can effectively meet the two major public expectations viz. Cost effective and affordable medicines of given framework of excellent manufacturing process, technology, regulatory compliance, distribution system and prices.

On the export front, pharmaceutical SMEs in India have traditionally been less focussed on exports in comparison to large domestic firms. However, now they have become preferred partners for the 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).

Secretary, Ministry of Micro, Small and Medium Enterprises, Madhav Lal said, "There's a pressing need for the state governments, local governments to join hand with the Central government and work towards increasing the presence of MSME's in the eco system."