There are calls being given by the Indian government to reduce imports from China. India is heavily dependent on the Chinese import of raw materials for manufacturing life-saving drugs domestically. The regulatory control over Chinese imports will be made tight through strict scrutiny of Active Pharmaceutical Ingredients (APIs), Key Starting Materials, and medical equipment.
Chinese consignments containing crucial medical equipment such as pulse oximeters, infrared thermometers, which are needed by hospitals during Covid-19 pandemic, are stuck at the ports.
According to JM Financial Institutional Securities Ltd, “Indian drug makers import about 70% of API requirement from China with imports from the country increasing steadily over the years (from about 62% in FY12 to about 68% in FY19)."
Note that Chinese API manufacturers have an advantage over India in terms of cost competitiveness, thanks to their scale benefits. Needless to say, an import ban on Chinese pharma-related products may lead to supply-chain disruptions for Indian firms. This, in turn, may mean adverse price movements, increasing costs for domestic firms, say analysts.
Raw materials from China are used in making antibiotics, paracetamol, and diabetes and cardiovascular drugs, among others. Companies including Lupin, Sun Pharmaceuticals, Glenmark, Mankind, Dr Reddy’s, Torrent, Aurobindo Pharma and Abbott are hugely dependent on Chinese imports.
Due to this sudden rise in API prices and geopolitical tension with China, the central government is working on a policy to provide support to the industry. The government is actively considering a policy which could be released in July this year.