AD HOC EXPORT restrictions on essential medical supplies, especially since the onset of the pandemic early last year, is prompting multiple Indian manufacturers and suppliers of these goods to explore the option of setting up alternate manufacturing bases outside the country to service their customers.
Hindustan Syringes and Medical Devices (HMD), the country’s biggest syringe manufacturer that owns the DispoVan and Kojak brands and exports to over 100 countries, is actively exploring setting up a manufacturing base outside India to insulate itself partly from sudden policy tweaks that impact their client commitments, a top executive said. Narang Medical Ltd, another Delhi-based medical equipment maker, is considering moving overseas lock, stock, and barrel overseas, over the next 4-5 years.
The issue of policy certainty gains salience again with the new Omicron variant of the coronavirus being highly transmissible and the demand for medical items including syringes likely to remain high. The World Health Organisation has already set the stage for booster doses of Covid-19 vaccine with priority being given to those population groups at the highest risk of serious disease, and frontline healthcare workers.
On October 4, 2021, to discourage outbound shipments, the Directorate General of Foreign Trade (DGFT) announced export restrictions requiring companies to obtain a license or government approval to ship syringes abroad. Just days later, on October 9, the Ministry of Health clarified the restrictions applied to three categories of syringes essential for the vaccination programme.
Rajiv Nath, Managing Director, HMD, and coordinator of the Association of Indian Medical Device Industry (AIMED) told The Indian Express, “We asked the government to remove the restriction on exports of insulin syringes. These syringes cannot be used for Covid-19 vaccination anyway and the Ministry of Health has supported our request to DGFT (Directorate General of Foreign Trade); 8-10 million Insulin syringes are lying with us as pending orders from countries like Thailand, Morocco, Myanmar and the United Arab Emirates.”
“It has taken us many years for us to build relationships. This disruption gives India a bad (name)… as a supplier of medical products,” Nath said. Hence there was a “serious thought” on setting up capacity outside India. “When the export ban came, since we are a global supplier, we got invitations from many countries that they have a shortage. Iran, Saudi Arabia, Oman, Uganda — they reached out to us to put up a plant over there,” he said.
Policy vagaries hurt brand
TO insulate from policy vagaries, producers of medical gear are planning to set up manufacturing units abroad. The government says India is not unique in banning shipments, but firms say not fulfilling commitments damages brand.
“This is something to be definitely seen strategically in the long-term. You can’t do it in one month’s time,” Nath said. HMD’s manufacturing units in India have a capacity of 1.5 billion auto-disable syringes per annum, which the company plans to ramp up to 1.8 billion syringes a year by March 2022.
After multiple petitions, syringe makers were allowed an increased quota for export of insulin syringes. Companies such as HMD expect to clear the stock of pending orders by December end.
Earlier, in January 2020, as the global outbreak of coronavirus intensified, the Centre had imposed a ban on export of personal protective equipment such as masks and clothing. The restrictions were lifted over the months as India progressively built domestic manufacturing capacity in these items, but the ban put multiple traders of such products in trouble.
“As soon as the pandemic hit, the prices of certain essential items surged 10 times. Since we were getting orders from our global customers, we procured the items at inflated rates. We took the payment made by our customers and paid our suppliers too. But suddenly, without notice, exports were banned (WHEN?), saddling us with deliverable goods with no export permission. By the time the ban was lifted, the prices cooled off, causing huge losses,” said Parveen Narang, Wholetime Director at Delhi-based Narang Medical, a manufacturer and supplier of hospital furniture, orthopaedic implants, autoclaves, suction machines, with exports to 80-odd countries. It also sells products including masks, PPE kits, thermometers, oxygen concentrators, orthopaedic implants, etc.
The company had set up an affiliate in Florida in 2015, which it leveraged during the export ban to meet supply commitments in the Americas and Africa. “We were lucky that we had a company in the US that gave us the ability to continue providing these Covid-19 essentials. Almost 90 per cent of our business comes from export to countries in Latin America like Mexico, Argentina, Colombia, Dominican Republic, in addition to African countries and Europe,” he said.
Narang said he has readied plans to become a US citizen, and eventually move his manufacturing base from Ghaziabad in Uttar Pradesh to either Mexico or Colombia, over the next 5-6 years. “We employ around 250 people now in the entire company, and barring 25 in the senior management, we had to lay off the remaining,” he said.
While honouring supply commitments, any lapse is always difficult to redeem, Narang said. “In December 2019, we had taken some large orders for a variety of medical equipment at a medical devices event in Dubai but weren’t able to deliver to our customers. Next month (January 2022), I have to face these customers again in Dubai in another such expo,” he said.
In April this year, soon after the second wave hit the country, the Centre had also abruptly halted export of Covid-19 vaccines to ramp up the inoculation drive in the country. Shortly after that, Pune-based Serum Institute of India, one of the biggest vaccine manufacturers globally, signed a pact with the United Kingdom to invest 240 million pounds to expand its vaccine business and set up a new sales office there. The restrictions, which had hit global initiatives like Covax, were lifted in November.
A senior government official, however, said India was not unique in banning shipment of essentials. Bans imposed by the Ministry of Finance, or the Department of Commerce have been “time-bound and product specific”, keeping in view the emergency in the country, the official said.