Expert Speak: Pharmaceutical Industry | Nepal Economic Forum

Mr. Vivek Man Vaidya
Executive Director, Vijayadeep Laboratories Limited

Along with health and financial crisis, business houses at the current time are followed by economic pain. This case can go severe if not taken care soon enough. Business turnover and chain effects are too big to fall. Business challenges such as sharp decline in collection of market, the collapse of market demand, unavailability of raw material, mental disturbance in the workforce and nominal cash movement have caused great havoc. This widespread concern is even worsening as there is no mobility of raw material and finished goods from China and India leading to a high level of isolation cost to the economy.

Entire sectors are going under business trauma because of Covid-19. This fiscal year has become more of a year of survival for all enterprises. Especially service industries, tourism, aviation and hospitality sectors have been hit hard by the outbreak. Tourism sector being one of the largest industries has been contributing 8 percent to Nepal’s economy, which shall by now would not contribute for the next 6 months at least. Similarly, foreign employment, which has been contributing 26% to the nation’s GDP in the form of remittance, has been impacted by the increased rate of virus pandemic.

Coming towards current scenario of the pharmaceutical industry, and talking about how it has affected, there are no patients in the hospitals and clinics due to restrictions in movement of the patients and fear due to COVID-19 pandemic. At present, the total pharmaceutical market of Nepal is estimated to be NPR 53 billion (approx. USD 430 million). Nepal imports NPR 28.65 billion worth of medicine from India and other countries, which is about 54.5% of the total market share, while NPR 24 billion worth of medicines are produced by domestic industries, which is 45.5% of the total market share. Presently 59 industries are in operation and 26 industries are in pipeline. Major challenges since the outbreak begun have been collection of payments from the local market, sharp reduction in sales due to lockdown, restrictions in the transportation of the medicines to other places, and availability of raw materials. Nepal imports 70-75% of raw materials from India while 25-30% from China. India imports around 80% of the intermediate products from China to manufacture raw materials. Therefore, Nepal is dependent heavily on India and India is dependent on China. Production of the raw materials and intermediate products have reduced sharply in China, as a result, the cost has gone up 2-3 folds. India has banned the export of the essential raw materials like Paracetamol and a few others, which is going to create havoc in Nepal after a couple of months if the situation remains the same. Most of the domestic industries are either shut down or running at 20% capacity during the study done industry wise. The industry is facing problem to import raw materials from India due to the increasing trend of epidemics while China, on the other hand, is not responding.

To gear up the activity for better survival position of the industry, government and banking sector’s role is crucial. Policy for collection from market party needs to be secured as goods that were sold in credit earlier needs to be paid by now. What next if retailer party never intended to pay during the lockdown period. Who shall bear that risk? Similarly, in the case of such low collection point, how can businesses make payment to international party? NRB policy cover issues of interest and short term loan dues till the period of Asadh. However, what should be the next provision if business houses are not fully operating until the end. How can those bank interests be paid in Asadh if the business transaction of the credit market is not operating now? Besides these, a big challenge during the collection is the feeling of being in an uncomfortable zone. On top of it, there is no such article or regulation where collection for private company can be effectively applied in case of failure in recovery. This is because people are trapped in social trauma where everyone says “How can you ask money in such pandemic time and how can we pay”. Hence, to bring back orientation of market in discipline, every organization needs to act as a partner to each other. Banks, vendors, parties all stakeholders need to plan together sincerely at the least.

The above Expert Speak edition is written by Mr. Vivek Man Vaidya. He is the Executive Director of Vijayadeep Laboratories Limited.

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