Sikkim turns into a pharma hub

There’s 100% excise duty exemption on finished products manufactured there, 100% exemption on income tax, capital investment subsidy of 30% on the investment in plant and machinery, interest subsidy at 3% on working capital loan and even reimbursement of 100% insurance premium. On the top of it all, Sikkim also offers attractive freight subsidy.

"The benefits which we get in Sikkim are truly attractive and in some cases even better than that in Baddi. However, the freight benefit may not have a huge impact on the pharma industry as freight cost in the domestic market accounts for just 1-2%," says Unichem Laboratories vice president (finance) Rakesh Parikh.

The scale of benefits at Baddi, such as excise, had eventually come down. In fact, the pharma sector made a beeline for Baddi around 2004-05 to cash in on the tax incentives. As many as 180 pharma units had since then set up base in Baddi. Can, then, Sikkim match up to Baddi?

While the likes of Sun Pharma feel it is still early days to truly compare Sikkim and Baddi, no one is willing to completely write off the state’s potential. "Even if we forget the excise benefits at Sikkim as such benefits are now also available in several states, the biggest draw for the state is its ten-year income tax holiday. This could mean a lot for profitable companies like us," claims Parikh.

However, a section of the industry feels the state needs to work on certain grey areas to emerge as a major pharma cluster. "Infrastructure is still the biggest concern in Sikkim. However, the good news is that the government is now emphasising on this. The state is also addressing the power situation. The recent announcement of constructing the rail link in Sikkim will provide a further fillip," says Cipla’s Kumar.

Agrees Daara B Patel, the secretary-general at Indian Drug Manufacturers’ Association (IDMA) — the apex body of Indian pharma companies. "Certain vital factors are still missing in Sikkim. The state government needs to come up with a dedicated policy to support the pharma industry. Plus, there are issues with availability of skilled workers which again the state government can address by setting up training institutes," Patel says.

Be that as it may, analysts feel the Indian pharma companies always prefer to flock together. It had happened in Goa, Baddi and now Sikkim should not be an exception. More so, since the big guns have already tested the waters. The state has another latent edge — the Silk Route of India or the Nathu La Pass. The industry believes this could act as a shortcut for the Indian industry to tap the highly potential Chinese and CIS countries.

The pitch seems to be perfect for the next-phase expansion. "Poor marketing is a handicap which the East has perennially been suffering from and Sikkim is no exception. And it is here that Baddi had scored trumps. If Sikkim can effectively market itself and the benefits it offers, there can be no reason why it cannot emerge as the next Baddi," adds a senior executive of a Gujarat-based pharma company, which has invested in the state.
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