Resurrecting Brand AP

Visakhapatnam and Nellore to play pivotal roles in rebuilding Andhra Pradesh’s reputation as a leading pharma hub By Prathiba Raju

Andhra Pradesh, gearing to enter a new orbit of growth, is set to revive its IT and pharma sectors which took a hit post bifurcation. A major chunk of the pharma industry’s base remained in Hyderabad and its surrounding districts of Ranga Reddy, Mahabubnagar, Medak and Nalgonda which became a part of Telangana.

The state has plans to become to regain its position as a major pharma hub and is beckoning investors Now, the Andhra Pradesh government is contemplating to set up two big pharma clusters, one in Visakhapatnam and the second one in Nellore district of the state.  These upcoming new clusters are expected to be crucial connecting points for the East and Far Eastern countries. Located in the middle of coastal Andhra with well-developed infrastructure, an international airport  and good rail connectivity, among other advantages, Visakhapatnam is well positioned to take on a pivotal role in further progress in the pharma sector. Lured by the incentives offered by Chief Minister of Andhra Pradesh, Nara Chandra Babu Naidu, multinationals such as Mylan, Eisai, Johnson & Johnson, Hospira have set to make significants  investments in the state. Major domestic players such as Dr Reddy’s Laboratories, Aurobindo Pharma, Hetero Drugs, Divis Laboratories, SMS Pharmaceuticals, Cipla, Ranbaxy, Laurus Labs, Lee Pharma, Sionc Pharma, Pharmazell, Raks Pharma, Natco, Granules, Neuland Laboratories have also made inroads in the state.

Thus, the industry too is keen to leverage the opportunities being offered by Andhra Pradesh.

Teeming with opportunities

The US-India Business Council, during a meeting with the Chief Minister, had discussed investment plans worth around $5 billion by Mylan, which has four facilities in Visakhapatnam.

SV Krishna Prasad

Citing that the sunrise industry has a bright future in AP, SV Krishna Prasad, CEO and Director, Cito Healthcare says, “The Andhra Pradesh government is taking proactive steps to develop the pharma industry in the state.  In the recent bifurcation, the state had lost a major chunk of pharma industry to Telangana. So, the state government has taken measures to expand the pharma industry’s base in AP. As of today, the North Andhra region of pharma industry is worth nearly $2 billion.”

Adding to the state’s advantage is the Jawaharlal Nehru Pharma City (JNPC) built over 2,200 acres at Parawada near Visakhapatnam, has 600 acres  under SEZ. This has attracted major investments from Hospira, Mylan, Eisai, Reddy’s Lab and Aurobindo Pharma. Apart from these, major companies such as Hetero Drugs which has a huge plant near Nakkapalli and Divis Pharma also have their expansion plans charted out for the state.

Also, Lupin Pharma has plans to invest nearly Rs 500 crores while Biocon also plans to revive its Parawada facility. Johnson & Johnson has shown interest in setting up a greenfield project,  So, these indicate that Andhra Pradesh is striving to be a preferred destination for the pharma sector.”

“In the coming years, exports are expected to have a quantum jump, as the state government is adding another cluster in the JNPC region. This would give a double boost to the new investors as most of the ancillary units required will be in the same vicinity. With this, VisakHAPAtnam will have two pharma clusters, one at Parawada and the other which is yet to be finalised in the nearby vicinity to the existing one,” adds Prasad.

Creating coastal clusters

Visakhapatnam’s 900 km sea coast is one of the most advantageous aspects for the development of the bulk drug industry. It is proposed to be one of the major logistics hub in the country, while Nellore located in the banks of Penna river, is also luring investors from the pharma sector.

According to experts, Andhra Pradesh is strong in manufacturing of bulk drugs and third in formulations in the country.  The bulk drug segment will open a vista of opportunities for coastal regions in the state. It will emerge as bulk drug manufacturing hubs, against the traditional bulk drug hub Hyderabad. The districts that could stand to gain from the split include Visakhapatnam, Ongole, Nellore and Krishna.

Dr Lal Krishna

Dr Lal Krishna, CEO, Ramky Pharma City (India), Visakhapatnam outlines, “The pharma business has a good opportunity for growth in Andhra Pradesh , particularly in Visakhaptnam and Nellore. The state government is mulling over to build one more Pharma City similar to JNPC, for which  discussions are on.  The second pharma industrial park is said to be bigger one. The sector-specific pharma industrial estate is a highly successful business model; the operating cost is low, and competitive advantages are also there for the sector.”

“At present, the JPNC pharma city has 611 acres under SEZ and 1531 acres are non-SEZ. The state government has a plan to build another bigger pharma city at Parawada near Visakhapatnam under public/ private partnership. The Pharma City will have world-class infrastructure on an area covering 2,200 acres with state-of-the art environmental protection measures. This will facilitate the local industry to expand its manufacturing facilities and it is a positive signal for the pharma and biotechnology investors in the state,” Krishna adds.

Not just Nellore, Visakhapatnam, with its coastal line, will provide cheap maritime transportation of pharma products which can easily be exported or imported through ports, opines Prasad.

“Post bifurcation, Visakhapatnam is the next largest centre for pharma sector. The state government is taking measures towards setting up clusters along the coastline with the ports such as Krishnapatnam, Machilipatnam and Kakinada. Apart from strengthening its ports, they are also increasing connectivity via road, particularly the Visakhapatnam-Chennai Industrial Corridor (VCIC), which will boost logistics and help the region to be a crucial connect point as well as logistics, manufacturing and bulk drug hub of the country,” he adds.

Fast-forward mode

The state is also girding up for higher growth in pharma and biotech sectors and transforming itself from just a bulk drug manufacturing base. The state government is setting up three mini life sciences parks, which will be coming in the next three years. Plans are also to set up Life Sciences Knowledge Centres across the state through the PPP model.

In the coming years, exports are expected to have a quantum jump in the state with expansion plans of the existing companies inside and outside JNPC, along with a proposed life sciences park.

Sasikant Misra

“The state government has planned to develop a mega Life Sciences Park at Visakhapatnam in 200 acres of land and also plans to develop a skill development and training centre to cater to the need of skill for the workforce employed in the industry and to generate new employment prospects in the sector. The state being a major contributor to the country’s exports in the category of bulk drugs/ APIs needs the support of the Central Government for growth of the sector especially in the formation of a bulk drug policy, which would have specific measures taken on making India self sufficient in the bulk drugs/ API segment and reducing the dependence on China,” says Sasikant Misra, Management Consultant and Ex-Team Member CII, Drugs and Pharma Sector.

Sanjit Singh Lamba

“The new measures like Life Science Park and Knowledge Centers are great initiatives by the AP government. There is a good climate for investment when it comes to pharma sector,” comments Sanjit Singh Lamba, President and MD, Eisai Pharmatechnology and Manufacturing.

Thus, the industry is very optimistic about growth however, it is not without challenges. Lamba recommends certain measures to overcome them.

He suggests, “The state is conducive for the sunrise industry due to factors such as  plenty of land, good government policies, an established pharma industry, a growing medical devices industry and the upcoming bio pharma research park being set up in Visakhapatnam. These factors are attracting many US and Europe companies to invest in Andhra Pradesh. However, though the state has immense potential, it does lag behind in providing  world-class  infrastructure, regulatory clearances are slow, and the pace of infrastructure development needs to accelerate. The state government should link investments with incentives and IT benefits should be given so that they investors are attracted to sector specific zones, bio parks etc. ”

“In order to develop the skill set and train the local workforce and equip them to pharma, bio park and medical devices industry a research institute similar to National Institute of Pharma Education and Research in Hyderabad,  should be set up in Visakhapatnam as well,” he further states.

Highlighting the need for more incentives from the government to boos the pharma sector in the state, he states, “Already burdened with Minimum Alternative Tax by the central government since 2011, we have not achieved much despite huge potential due to tax restrictions.  The companies in SEZs are burdened with heavy tax like the custom duty even when they supply it to their own subsidiary in the Indian market. People have their own facilities but they can’t supply to their own market because it is treated as import. If we invite a company to come and set up a facility in the SEZ here, it takes three to four years to set up the facility and get approvals.  Until then the companies should be allowed to supply in the domestic tariff area, with some rationalisation in tax by the state government as it  will help attract investors.”

Lamba urged the Andhra Pradesh government to give around three to four percent incentives based on their exports. “Such incentives can attract more investors, be it SEZ and non SEZ. China, Singapore, Philippines, Indonesia and Thailand are giving such incentives,” he adds.

Both the newly formed states of Telangana and Andhra Pradesh have a competitive edge when it comes to the pharma sector, but the  former also has good infrastructure in place. Andhra Pradesh too should work at creating better infrastructure and a  speedy approval system as these would be pivotal to its growth as a pharma hub. However, with the port cities in its kitty, the future is bright for Andhra Pradesh  in the sunrise industry.