Pharmaceutical Industry Sees Limited Relief from Customs Duty Exemption
The government's decision to exempt a wide range of petrochemical-based solvents used in medicine manufacturing from customs duty from April 1 to June 30 is expected to bring only minimal relief to the pharmaceutical sector. This move, implemented in response to the ongoing West Asia war, faces challenges as material costs continue to escalate rapidly, according to industry insiders.
Rising Costs Threaten Drug Price Stability
Sources indicate that due to the relentless increase in material expenses, Maximum Retail Prices (MRPs) for medications are likely to be adjusted upward this month. Historically, the rising costs of raw materials have not been transferred to consumers for most drugs. This is primarily because MRPs for an extensive array of medicines are regulated through the Drug Price Control Order (DPCO), which undergoes revision in April.
"The industry anticipates an MRP increase driven by escalating raw material prices when the DPCO is released. There exists a review mechanism that also takes input costs into account. Given the current upward trends, there is a strong possibility that prices may rise now," explained Ravleen Singh Khurana of Nitika Pharma, who also serves as the president of the All India Excipient Council.
Excipients and Supply Chain Challenges
Excipients, which are inactive substances in drugs but play a crucial role in maintaining stability, are at the center of this issue. Smaller pharmaceutical companies in cities like Nagpur note that they will only benefit if their material suppliers pass on the duty reduction to them. The conflict between the US and Iran has driven crude oil prices higher, making pharmaceutical solvents derived from petrochemicals more expensive.
Industry representatives report another round of price hikes within just one week. This surge has impacted the costs of materials used in producing common drugs, ranging from simple medications like paracetamol to oral rehydration salts (ORS) administered for dehydration treatment, as per sources.
Logistical Benefits Over Cost Relief
More than reducing expenses, the customs duty exemption is anticipated to facilitate the movement of materials that are in short supply due to the war, say industry players. Previously, with customs duty imposed, consignments could be delayed for weeks while clearance formalities were completed. Now, with no duty levied, it will at least expedite the release of shipments as no clearance will be required, according to sources.
Specific Price Increases in Raw Materials
Subodh Deulgaonkar of M/s Snehal Pharma in Nagpur highlights that prices of raw materials for various drugs have surged further in a week. The raw materials for manufacturing paracetamol, a common fever medicine, had already risen to over Rs430 per kilogram from a normal level of Rs250. They have now reached Rs700 per kilogram.
The rates for materials to produce doxycycline, a widely used antibiotic, have climbed to Rs6,200 per kilogram from previous levels of Rs4,300 to Rs4,800 per kilogram. There have been instances when these rates were as low as Rs3,000. Even the material for making ORS, which is not related to petrochemicals, has increased to Rs22 per kilogram from Rs18 per kilogram.
In summary, while the customs duty exemption aims to alleviate some pressure on the pharmaceutical industry, its impact may be overshadowed by the rapid rise in raw material costs and potential MRP adjustments, underscoring the complex challenges faced by the sector amidst global conflicts.
