Solutions in Achieving Self-Reliance in India’s API Industry

Aditya Sanjay Mhaske
6 min readDec 15, 2020
Photo by Engin akyurt on Unsplash

Even as India’s dependence on imports is considerable, policies formulated by the government to attenuate the identical have remained only on paper. Long term tax holidays, affordable cost of capital, and priority access can go a protracted way. The technology exists in India and is further augmented by deep regulatory bandwidth within the pharma sector. A push to form economics work would be an excellent initiative. India certainly has policies that are well-strategized and executed. If we glance at the business portfolio of the top 10 or 20 Indian manufacturing units, their exports account for about 60–80 percent. They’re not fascinated by doing domestic manufacturing anymore and have become trading companies. Also, if China takes about six months to line up the factory and produce raw materials, India, on the opposite hand, takes about six years to make a factory for the assembly of raw materials. Indian API industry incorporates a complex license renewal system. Indian manufacturers have to approach various authorities for the renewal of applications.

Reasons behind the Indian Government is incapable of producing raw material

One of the key reasons for the high dependence on China is the cost advantage. China, per KPMG, incorporates a 20–30 percent cost advantage over India and it varies according to APIs. As an example, KPMG points out that India only has cheaper labor costs than China. Otherwise, the material is 25–30 percent cheaper in China, electricity is 20 percent cheaper and other costs are 30 percent cheaper in China over India at the same time, the production costs are also low in China. Factors that allow China to own such a price advantage are simply doing business, economies of scale, government support, and technology investment amongst others.

India has lost its cost advantage, per experts, due to factors like inadequate financing, infrastructure, lack of or slow clearances. As an example, KPMG points out an environmental clearance for an API plant that needs to get a nod from multiple agencies like the State Environment Impact Assessment Authority, Coastal Regulation Zone, State Pollution instrument panel amongst others. The whole time taken from land acquisition to clearances to manufacturing can be 3 to 4 years. Even with land, the clearances for India would take up to 2 years, for China, KPMG points out, it takes 6 months.

Ways for India to be independent in terms of APIs

1. The government in March 2020 allocated Rs 3,000 crore for the following 5 years to market bulk drug parks in India. The govt. also approved a Production Linked strategy worth almost Rs 7,000 crore. While these are steps within the positive direction as per industry heads, the implementation of the initiatives is vital. Also, focused measures, especially to cut back the price differential to make sure sustainable production, are most significant as per industry. The government must also study measures like encouraging R&D.

2. To encourage sustainable low-cost production of APIs, KPMG recommends within the short-term implementation of single-window clearances, prioritizing environmental clearances, soft loans with longer repayment. within the long run they recommend private sector participation via the creation of enormous scale clusters, common infra facilities, and subsidies for upgrading technology among others.

3. One of the opposite industry recommendations is additionally to restart non-functional API plants. Currently, India has around 18 non-functional facilities that have either stopped, closed, or partially produced for captive production. These plants began operations anywhere from the 1960s to 1990s and include plants owned by the likes of Biocon, Alembic, Lupin, Glaxo, and Sandoz amongst others.

Suggestions that the Indian Government should consider

1. Government should rationalize the prescription of medicine. Every physician should prescribe drugs with generic names legibly and preferably in capital letters and he/she shall make sure that there are a rational prescription and use of medicine. This could mean practicing only evidence-based medicine.

2. Restrict the utilization of paracetamol for top fever and don’t misuse tinidazole and metronidazole for acute diarrhea and vitamins B1, B6, and B12. Antibiotics like chloramphenicol, erythromycin, clindamycin salts, and neomycin in any way have restricted uses. The government should make a listing of non-essential drugs in shortage so that all doctors are attentive to them and don’t write them if not essential.

3. To promote the API industry, the government should give its manufacturers free land, low-cost utilities like water, steam, and power, and negligible financing costs. It should also liberalize policies for clinical trials and approval of already approved drugs in other countries.

In 2019, the FDA issued an alert over a cancer-causing ingredient, NDMA, employed in the pressure level medication losartan and valsartan, made by Chinese company Zhejiang Huahai. This resulted in the recall of such drugs across the world [02]. So, it’s time for India to become self-reliant in APIs to stop another shortage just like the one the coronavirus has inflicted on that.

Solutions to the problem:

  1. With the potential expansion of the market both in size and variety, scaling up opportunities needs a structured approach. As an example, an action plan for integration/complementarity between drug manufacturing and biologics must be effectively detailed, particularly considering the vast expanse of technical skills available in these sectors. Together with many patents expiring, investment opportunities abound for pharma companies [03]. The role of the government is to facilitate these investments through appropriate fiscal instruments, investment strategies (FDI, M&A), and promoting a predictable investment climate with fewer uncertainties in pricing policies.
  2. The R&D spend by companies will increase not only for product extensions but also for brand new development. Considering the large initial investment required and high gestation time for recovery, incentivizing R&D spend along with developing skill-based/knowledge-based ancillary units will facilitate capturing the gains from the growing CRAMS market. The proposal for fitting SEZs, parks, and developing clusters should be seriously considered. During this context, the collaboration between companies for co-investing, market creation must be encouraged. Altogether, the target should be to develop a good ecosystem for promoting the Indian pharmaceutical industry.
  3. With the expected growth in demand, particularly within the emerging markets (especially India), the marketing strategies and branding (brand extensions) will undergo significant changes. Although the retail segment is maybe visiting dominant, the hospital channel will gain importance, leading to various hospital formats with varying value propositions within the realm of treatment protocols and profitability. As such, the model of engagement with hospitals will change and it is the responsibility of the regulatory framework to verify a competitive yet technically dynamic industry.
  4. Diversifying supply chains can certainly help because any concentration within the supply chain may end up in potential damages to businesses even as happening today. Indian businesses can diversify their vendors and provide chains so that the general risk is mitigated.
  5. Negotiation for a discount of the substantial increase in product registration costs and prolonged timelines (3–5 years) for registration in countries, like the EU, Republic of Korea, Turkey, the USA, Russia, China, and Brazil must even be haunted.
  6. The synergy between industry and major government institutions and universities for technology transfer and property Rights for research and innovation should be Encouraged.
  7. Establishment of a robust IPR enforcement regime that might protect innovation and stimulate the expansion of the Indian pharmaceutical industry Setting up specialized courts that are equipped to adjudicate issues involving pharmaceutical patents

Challenges to implementing Solution

  1. Low capacity utilization is one of the primary restraints to the Indian pharmaceutical industry. According to the MCI report, India has a capacity utilization near forty percent versus seventy percent of China.
  2. COVID-19 slows down production due to health and safety issue, shortage of labor from labor union
  3. India has a lack of skilled labor; labor training is essential for manufacturing and understanding production.


[01] Grigorov, P.I., Glasser, B.J. and Muzzio, F.J. (2013), Formulation and manufacture of pharmaceuticals by fluidized‐bed impregnation of active pharmaceutical ingredients onto porous carriers. AIChE J., 59: 4538–4552. doi:10.1002/aic.14209

[02]Thamer A Omar, Sarang Oka, Fernando J. Muzzio, Benjamin J. Glasser, Manufacturing of Pharmaceuticals by Impregnation of an Active Pharmaceutical Ingredient onto a Mesoporous Carrier: Impact of Solvent and Loading, Journal of Pharmaceutical Innovation, 10.1007/s12247–018–9349–6, 14, 3, (194–205), (2018).

[03] Scott, A.W.M. Non-Medicinal Ingredients. Drug-Safety 5, 95–100 (1990).

[04] Geijo, F. Quality management in analytical R&D in the pharmaceutical industry: Building quality from GLP. Accred Qual Assur 5, 16–20 (2000).

[05]Schoonover, M.W., Cohn, M.J. New materials discovery for industrial applications. Topics in Catalysis 13, 367–372 (2000).

[06] Growth Insights on China’s Pharmaceutical Industry, Forecast to 2025 ID: 4968410 Report January 2020 Region: China 55.

[07] Over-dependence of India for APIs and Raw material:

[08]Ingredient to produce essential drugs:



Aditya Sanjay Mhaske

Research Assistant at Kelley School of Business | MS Data Science | Machine Learning | Analytics