The pharma industry in India is facing a severe container shortage, and unavailability of space on vessels across the country is impacting the pharma export activities significantly, inform industry stakeholders. Moreover, the increase in freight charges is further affecting pharma companies’ financial performance and also alarming about the shorten shelf-life of produced pharma products, which are either lying at ports or warehouses.
Recently, in a webinar, DV Sadananda Gowda, Minister of Chemicals and Fertilisers said that during 2019-2020, pharma exports from India recorded over $20 billion,which is expected to cross $25 billion by the end of the current financial year. However, the industry expressed concerns over achieving the set target amidst several critical factors which are affecting growth adversely. The industry is urging the government authorities to intervene in the matter and provide a solution on a priority.
Dinesh Dua, Chairman, Pharmexcil, explains, “Container shortage in India arising out of uneven import-export scenario has led to an increase in freights on all routes in the range of 20-80 per cent. And imports to India nosedived by 25 per cent between April-November, 2020, whilst exports volumes have risen by 25 per cent. This had led to a container shortage in the domestic market. In value terms, India’s exports, as well as imports, between April-November 2020, have declined by 18 per cent and 34 per cent respectively.”
He said, “Increased freight cost has impacted the margins of exporters across sectors. It’s a double whammy wherein customer is not ready to pick up goods at increased prices, while shipping lines have raised freight. Though freights have gone up for the container segment, the issue of availability of containers eases to some extent if bookings are done in advance. Now the exporters are planning with shipping lines about one to two months in advance and making sure cargo moves on time.”
Similarly, Sandeep Modi, Secretary and Director, Federation of Pharmaceuticals and Allied Product Merchant Exporters (FPME) and Director, Infugen Pharma, expressed, “Despite several measures initiated by the Government of India, the scenario is that exporters are suffering badly due to shortage of containers as well as lack of space on shipping vessels. It has affected total supply chain management which has resulted in an increased period of transit. It is also noted that stocks which are ready to export are lying at warehouses, this has resulted in blocking of working capital of paid-up inventory.
He informed, “Besides this, the freight charges have also increased multiple times. For instance, the freight for Maputo for 40ft HQ Container was $1550 in May, whereas, now it is around $3000. Since we are not sure about cargo movement, it is noted that Dar Es Salaam freight is also increased from $1050 to $1900. Unfortunately, India is not AtmaNirbhar in shipping as not a single shipping company from India is operational. Pharma exporters need to deliver certain products under the stipulated shelf-life period and these delays are also affecting overall medicines’ shelf-life. Therefore, on behalf of the industry, the FPME requests the Ministry of Commerce and the Shipping Ministry to resolve this issue at earliest so that exporters can complete their shipment and avoid further losses.’
M Madan Mohan Reddy, Director, Aurobindo Pharma, informed, “Aurobindo Pharma has been impacted due to container shortages and hike in ocean freight. Ocean freight rates have hit the roof and liners are charging a premium for allotting containers. We have witnessed an increase of about 30 – 35 per cent on our ocean freight rates, adding to the pain of increased freight, we have had challenges due to delayed container placements of reefer containers for the Europe sector.”
He continued, “Earlier, in May and June this year, we observed that the US sector had an impact due to blank sailing at that time. However, since August this year, containers are available for the US sector, though at a premium. Similarly, the Europe sector has been also impacted due to vessel schedule changes and we had longer transit inspite of paying high freight. Uneven import and export in India have caused this and we had foreseen this.”
Reddy highlighted, “The point to be noted particularly is that freight from China is three times higher than the pre-COVID rates and rates for special equipment containers are around five times. Besides this, the situation in the East Coast is also worse than that of the West coast as Colombo congestion and port strikes are adding to the transit/container repositioning.”
Dr Ambrish Kumar, Founder, Zipaworld and Group CEO, AAA 2 Innovate said, “The containers shortage causing global trade imbalance is a result of the severe shoot up of China’s exports during the pandemic. It is causing a disproportionate turnaround of the movement of containers. This has, in turn, resulted in skyrocketing of ocean freight almost by three to four times than usual.”
He continued, “India is currently competing with China as a global supply hub, but due to container shortage, India’s competency is deteriorating as production is high but the movement is down. Another major concern is the shelf life of the pharma products, The prolonged dwelling time is leading to spoilage. Transportation by air is not a viable alternative due to the already burgeoning air freight prices and low capacity. India is losing the opportunity of meeting the high demand for pharma from Europe.”
He predicts, “This issue might remain till at least the first quarter of 2021 due to low availability of containers. Therefore, the Indian Government, with authorities of other nations, need to intervene to prioritise global pharma distribution and safeguard humanity, as the profitability of the shipping carriers is of lesser importance.”
Dua added, “Pharma exports grew at 18 per cent for the period of April-October, 2020, however, this could have grown even at 25 per cent if container shortage was not there. The increase in freight is being absorbed by exporters, thereby affecting bottom lines. But, Piyush Goyal, Minister of Commerce and Industry, Government of India, Ministry of Commerce and Industry and Hardeep Puri, Minister of State of Civil Aviation have issued instructions to ease out container shortage by auctioning long-standing import containers, which have not been cleared for several months.”