'Indian pharma machineries have a good price: performance ratio'

The Indian pharma machinery industry has come a long way from being an import-dependent sector in the sixties and seventies, to an industry with an annual growth rate of 14 percent to 17 percent. Barriers like foreign exchange shortages, heavy import duties and restrictive import licensing policies turned out to be a blessing in disguise, because these brought to the fore India's own engineering minds, who soon started making pharma machinery at cost effective rates. Bhavna Shah, President, Indian Pharma Machinery Manufacturers Association (IPMMA) spoke to Viveka Roychowdhury about the future challenges facing this industry

Bhavna Shah, President, Indian Pharma Machinery Manufacturers Association (IPMMA)

Is the Indian pharma engineering and machinery sector a net exporter? Are there certain segments where we still need to import machinery?

In value terms, there are more machines being imported today than exported, but in terms of quantity, it is reverse. This is because imported machines are more than seven to eight times the value of the Indian machines. We still do not make machines requiring high technology and also lab equipment required for R&D labs, therefore we still need to import these machines.

What is the reason for not manufacturing these machines?

Those who import pharma machinery are setting up world class facilities to export products/ formulations, therefore they need to have imported machines as these meet these standards. This is a niche market.

The demand for lab and R&D facility machinery is very low, but at the same time, it requires high investment to develop this equipment. Putting up such infrastructure cannot be justified if the demand is not so high, therefore we still import this segment of equipment.

What are the strengths of Indian pharma engineering and machinery players?

In one word, value for money. Indian machineries are extremely competitive and have a good price : performance ratio. Secondly, Indian pharma machinery manufacturers have not yet got into the culture of strictly adhering to contracts. So we give better after sales service, going beyond the Annual Maintenance Contracts (AMCs). We are very flexible for customers in terms of deliveries, contractual terms, etc. Foreign manufacturers do not give such support to pharma manufacturers. These are our major strengths.

Who are the main competitors/ which countries?

Upto 2004-05, Italy, Germany, South Korea were our main competitors. In recent years, there has been a lot of interest and activity from Chinese suppliers of pharma machineries. It is still at the initial stage but there is sizable penetration of Chinese suppliers into the Indian market. But we have learnt that not all Chinese manufacturers are good, some are bad manufacturers. In certain categories like distillation plants required for sterile products, you would not take a chance with Chinese manufacturers because you have to be sure of the results. They have a mass manufacturing capacity; they can make 200-300 machines in one go, while we can go only upto ten at a time. That is the huge difference. Labour is cheap, raw material is cheaper in China, unlike in India. But they do not have high end technology. But it is definitely a source of worry for our industry.

What are the issues facing the sector and how can they be dealt with?

The biggest issue is that there is very low investment in R&D. Secondly, the manufacturers do not work together and therefore it is a fragmented industry, of small scale manufacturers. One of the agendas of IPMMA was to unite the industry, but unfortunately we have not been able to do this very successfully. We have not been able to scale up economically and invest in R&D in a bigger way. If we were to cooperate in marketing and R&D efforts, this could become a reality. Another issue is the lack of trained manpower. This was not the scenario earlier but nowadays it is a worry. Salaries have risen and this makes it difficult for small scale manufacturers to attract and afford skilled and trained manpower.

Another unfortunate issue is that we cannot attract international manufacturers for high value, high tech products to have joint ventures, for technology transfers. For this, we are continuously working on improving the brand image of our products and industry but it is a problem. In the engineering space, we have been able to overcome this perception to some extent. For instance, my company Pharmalab has a tie-up with a Finnish company called Elomatic for engineering design. We get technical support from them and do the engineering design here in India as this works out much cheaper. So this has worked out well as we have the support of a European brand name.

In this scenario, what is the role of an organization like IPMMA?

We work for the benefit of pharma machinery manufacturers and encourage small scale manufacturers. IPMMA has now around 245 members across the country. We are now getting recognition and are in dialogue with similar industry associations on the international scene.

We also work together with the Central government office on certain issues. For instance, when Pakistan has banned import of Indian pharma machinery, we along with the Engineering Exports Promotion Council (EEPC), made a presentation to the Pakistan government and as a result, half of the machines were dropped from the list of banned equipment. We continue to work on getting approval for those items still on the list.

In addition, we circulate international trade enquiries to all IPMMA members and also ensure maintenance of fair business practices in the industry. We have a presence at major exhibitions dealing with this sector; in 2007 itself we have around seven-eight major exhibitions like the upcoming P-MEC India. We work with ITPO on this. Many international players are coming to the exhibitions. At P-MEC India, we requested a buyer-seller meet and the German association VDMA is also collaborating with us.

We also organise seminars to help industry professionals. For instance, we anticipated that Indian pharma machinery professional will meet with international players at P-MEC India. So to help them deal with the documentation requirements, IPMMA in association with PriceWaterhouseCoopers, organised a seminar for joint ventures, marketing tie ups. This is a part of a continuous process.

What support does the industry require form the Government of India?

We need support from the government for exports and to give incentives for increasing R&D investments. The government can also play a role in encouraging technology transfers and tie ups.

What we also lack is a pharma engineering college. We have many pharmacy colleges but no pharma engineering college. So we have been working with the Bombay College of Pharmacy, at Kalina, Mumbai and are giving them inputs for course materials on pharma engineering. The present scenario is that we take on interested students from the Bombay College of Pharmacy and train them, as interns, on-the-job at our company in the pharma engineering aspects to fill the gaps. But this will not work out on a long term basis. Similarly an engineering graduate has to learn the pharma aspects of the job. So such a course will be helpful for the pharma industry. This will most probably be incorporated from the next academic year.

Given that the pharma industry is set to grow, how can the Indian pharma engineering and machinery sector keep pace with this growth?

There is no demand supply gap, in terms of volumes. We are able to meet the needs of the industry. Around a year and a half ago, we were overloaded with orders and everyone has increased their capacities. What we do have to do is keep pace with the rapidly changing technology on the international scene. For that we have to invest in R&D, build the brand. We also need to enter into technology transfers. We need to have marketing tie-ups internationally so that we can increase our volumes and scale up. These efforts are on, but we need to do much more.

What further evolution, in terms of technology, investments, is required for the machinery sector to truly partner the pharma / life science sector?

We need to upgrade to newer technologies, to increase levels of automation. We also need to improve documentation. On the documentation front, we are requesting personnel from pharmacy colleges to train industry professionals in better documentation techniques.

viveka.r@expressindia.com