It’s official
Setting up a manufacturing plant entails a significant amount lot of ground work. As this industry deals with human life, an array of permissions are required from different government offices. This is where the agony begins for pharma players. With a few exceptions, at each stage they would be asked to empty their pockets to get necessary clearances on time even when they have done things as per the rules.
Shashank Sandu, Director, Sandu Pharmaceuticals, says, “Yes, it is true that government officers create hurdles because they know what laws/rules have been framed. In general, no businessman would like to waste time in clearances since time is money for him. He will want to get his project up and running as cost of the capital, be it interest or opportunity cost, is always biting into the total cost.”
Deepali Chile, Chief Executive Officer, Brassica Pharma, reiterates that time is precious for any entrepreneur. She says, “Any entrepreneur, on a monthly/yearly basis, has to deal with government/non government agencies like Maharashtra Industrial Development Corporation (MIDC), factory inspector, Maharashtra Pollution Control Board (MPCB), Maharashtra State Electricity Board (MSEB), Food and Drug Administration (FDA), City and Industrial Development Corporation (CIDCO)/Drug Controller General (India) (DCGI), labour, local gram panchayat, excise-state and central, sales tax, weight and measures, mathadi unions, security board, customs and port, local political parties, transportation local body, income tax and local journalists. On an average, even if one department takes one week’s time for settling any issue, around 20 weeks out of 52 weeks a year are spent by an entrepreneur in doing liaison work. How can you expect him to do a productive job?”
Pravin Herlekar, CMD, Omkar Speciality Chemicals Ltd. (OSCL) |
Pravin Herlekar, Chairman and Managing Director, Omkar Speciality Chemicals Limited (OSCL), does not feel that government officers are major hurdle creators. He says, “The hurdles are created, on account of the need to deal with various departments which work in isolation. This problem can be solved by adopting a single window system, about which the government has been talking for many years, but has still not implemented the same. The single window system will get rid of all the worries faced by an entrepreneur in seeking necessary consents/ clearances from various departments. It will streamline the process of setting-up of new ventures or expansion of existing business.”
Echoing what Sandu and Chile had said, Sharad Dahatonde, General Manager, Biotechnology, Elder Pharmaceuticals, too points towards delays in getting different approvals or clearances. He says, “Normally the process of setting up a plant is simpler in SEZ but very difficult in non-SEZ.” Speaking about non-SEZ areas, Dahatonde explains, “Difficulties are faced in getting no-objection certificates (NOCs) and other clearances from the Pollution Control Board for units and other related activities in non-SEZ zones. Even getting environment clearance from the Ministry of Environment and Forest is a challenge. Permissions are required for adequate water and electricity supply as well. Getting FDA licenses are too difficult in such non-SEZs.” He further says, “The government officers normally do not follow the time-lines for such clearances and delay the process. This indirectly affects the project cost, including potential of the business. Even after beginning the operations, there is no guarantee of support from corresponding authorities, which is not a good omen for the industry’s growth.”
Pharma, an easy prey?
Mainly, new start-ups and SMEs are the victims of unlawful activities by some selective government officials. This section of the industry is not considered cash rich. Their business, which is mostly backed by loans taken from different banks or financiers, suffers a lot as considerable amount of time and money goes into fulfilling demands of corrupt government officers.
“It starts right from the land allotment stage and goes on even after the project is up and running. So it is the entire gamut of departments which are involved in demanding favours. Government departments consider an industry as the hen that lays golden eggs and so they are in the waiting for the opportune moment to take their pound of flesh,” says Sandu.
Chile says that difficulties keep on changing as per the situation and department you are dealing with. “The pharma companies are mainly required to face FDA administration, frequently. FDA has clear cut guidelines regarding the basic requirements of the plan and documentation of production, quality control, etc. hence if these guidelines are strictly followed or adhered to, there should not be any confrontation with this department,” says Herlekar.
Ground reality
The woes of pharma players don’t end with bureaucracy and red tapism. Sometimes an area where a plant is located is full of problems like threats from local goons or political interference. Government should ensure a safe working environment for the companies, which is perhaps not happening. “When a formulation plant of my company was under construction local goons and politicians used to threaten me or my staff. They would regularly demand money from us. They were behind us to recruit people of their choice even if they didn’t have necessary qualification. I was even asked for tour packages to the US and the UK. Unfortunately, I had to accept most of the demands as all such elements work hand in hand. A loss due to these issues goes into lakhs of rupees,” discloses a the Chairman of a company who does not want to reveal his name. This company deals in speciality chemicals.
“The basic problem is the scant respect that industrialists are given by everyone in the society and this starts from the government itself,” says Sandu. He adds, “Indians think that an industrialist setting up a facility has bags of money with him. But, it’s his hard earned money. Anywhere else in the world businessmen are accorded respect due to which no local goons political interference etc. comes in as a major hurdle. Having said this, we must also keep in mind that the industry is a part of the society, so it cannot function in isolation. Industry follows a capitalist model requiring a totally different political treatment in the entire scheme of things, and this the politicians must bear in mind.”
Chile says, “The Ministry of Labour takes care of labour welfare. There is no entrepreneur welfare programme. It is a general notion that an entrepreneur earn a lot of money easily and it is then the right of other non-entrepreneurs to share it. Ultimately entrepreneurs are also people aspiring to achieve higher returns on investments done through their own capital or borrowed. Before earning a single rupee, entrepreneurs end up on negative balance by accounting for taxes starting from advance/tax, sales tax, excise tax, service tax and so on.”
Herlekar says, “The state of Mahararashtra has notified industrial areas developed by MIDC. MIDC should take the responsibility of providing basic infrastructural requirements such as good roads, power, process water connection, etc. Every industry located in the industrial area tries to recruit local manpower for skilled and unskilled labour. It is a fact that the industry faces problems from local goons or political interference. Such problems can be resolved by maintaining proper PR with various local bodies and adopting practices for arriving at amicable solutions, case by case. However, in case of extreme situations, the government should stand by the industry to rule out any violence or unlawful situation.”
Troubles galore
Though government departments, goons or politicians top the list of trouble makers, pharma players have to contend with other issues as well. According to Chile, the MIDC lands are not affordable so private lands are beyond the reach of new entrepreneurs. She says, “There are many MIDCs having sick industries due to various reasons like labour issues, non availability of trained manpower, remote locations resulting in additional transport cost and pressure from local contractors for using their services at higher rates or for poor services. If the land can be acquired or if there is a loan made possible for industrial land it will be advantageous.”
“There are pharma clusters in Thane, Nasik and Aurangabad, more cluster-based projects must be encouraged by providing state-of-the-art common facilities. This will help the SME sector to share costs and enhance quality, productivity and innovative capabilities. There is an urgent need for dedicated areas/zones to set up the API industry with common effluent treatment plant, generators and other requirements,” suggests Dahatonde.
“Maharashtra, in general, has a congenial atmosphere for industries,” feels Herlekar. However, he also says that the recent policy of moratorium being imposed on chemical and pharma industries in the Western Ghat region are preventing new pharma companies from coming up in these areas. Hence, the policies need to be flexible and clear while protecting the environmental issues at large.
Ayurvedic medicine manufacturer, Sandu points out that Maharashtra government has not done anything for the AYUSH industry while other state governments have declared it as a priority industry. Tax incentives offered by other states have largely eroded Maharashtra’s dominance in the pharma sector. Now, as the incentives have been taken away, pharma companies are again expected to flock to Maharashtra. However, unless the state government ensures a safe and corruption-free working environment, bringing back pharma companies would remain a distant dream.