The
designated authority in the department of commerce launched an
investigation into the dumping of Penn G by China on 16 January. SPIC
is the sole complainant, the company says that the other three
manufacturers, namely, JK Pharma, Alembic, and Torrent have either
closed their plant or suspended production following dumping. The
production of Penn G first crystals in 05-06 is less a fifth of the
8,000 MMU level in just two years ago in 03-4, according to the
Hyderabad based pharma export council.
The authority has asked the interested parties to file their responses
within 40 days of the notice. The investigation period will be
restricted to the one year period 1 October 2004 to 30 September 2005.
However, the injury investigation period will be spread over the four
year period 2001-2005. The wide gap in the time period between the two
investigation will contaminate the injury investigation with readings
of hurt due to other factors coming into the laboratory samples. As
usual, the normal value will be constructed arbitrarily using the data
of other countries when the fact is that the world industry has
succumbed to the onslaught of the dragon. One can expect a good dumping
margin which may translate to a 100 percent plus duty in the next three
months.
In April 2003, the DGFT removed Penn G, along with the connected 6 APA
(Amino Penicillic Acid) to the free list from restricted list as a
measure of QR removal in the WTO regime. The price crashed to $ 5.5 per
BU (Billion Units) in June 2003 from the earlier level of $10 per BU to
break the back of the Indian industry. It is claimed that production
below $ 6 per BU is not viable and China dumped only to kill industry
in India. The dragon had earlier eaten up the cartel of Europe
manufacturers, India was the only one left standing in the field.
Investments said to run into Rs 2000 crores were reduced to zero, the
financial institutions are alleged to have lost out on Rs 300 crores in
loans the Penn G industry.
The likely imposition of heavy anti dumping duty on Penn G will be one
of the worst disasters in the fortunes of the Indian pharma industry.
Exports will be the first to suffer. As much as half the production is
exported out of the country to practically every part of the year to
take advantage of the post TRIPS regime. India has captured the world
market in the off patent and generic pharma product segment aimed at
the low income sections of the world population. The anti dumping duty
is exempt only on a small part of the export segment covering only
quantity based advance license and imports into EOUs and SEZs. The
impost in the making must be suffered in all other cases. India is the
4th largest pharma producer in the world, accounting 8% of world
production. Antibiotics in bulk form alone account for Rs 1,000 crores
in the Rs 14,500 crore pharma export basket.
As things stand, it is already very difficult to import Penn G duty
free for export production, the advance license route is riddled with
all sorts of restrictions on prior import before export, actual user
condition, completion of export within three months of first import.
Registration with drug controller by foreign manufacturers is
compulsory and form 10 import license must be procured from the drug
controller in the normal case. The advance license route is the only
way to avoid the corridors of the Drug Controllers offices in Nirman
Bhavan.
The supplies in the domestic sector are inadequate and the price makes
both exports and domestic sale unviable. This will be accentuated by
the anti-dumping duty which will protect the sole manufacturer. Our
analysis of DGCIS data shows that the Chinese prices are over a quarter
of the 04-05 level in the first six months of 2005 compared to the
average of Rs 438 per kg in 04-05. The Chinese are not able to sustain
low price export. The material will leak in through the smuggling route
which was very active in the pharma segment during the license and
permit raj the pre-1990s.
The other option before users is to import 6-APA, the sibling of Penn
G. There is no possibility of imposition of anti dumping duty on this
item since there is no manufacturer in India. Of course, the anti
dumping authority may well cover 6 APA too in the Penn G crack down on
grounds of like product or substitute.
In short, the choice anti-dumping duty imposition is really that
between welfare of the inefficient single manufacturer and the
industry, consumer and exports. The safeguard law recognizer consumer
interest in the law decided by the white phosphorous case there is no
corresponding provision for consumers in the anti dumping law. The
nearest to is the Reliance inspired polyester staple fibre case which
collapsed from severe injuries suffered from heavy brick writ petitions
in various high courts by the powerlooms.
Foreign Trade Policy: Our sources say that the foreign trade policy is
caught in the cross fire between revenue and commerce. North Block is
not ready to give a single extra paisa for export promotion while Udyog
Bhavan says that money is what makes the Policy attractive. Revenue
refuses to exempt the special cvd for export promotion. It says that
the provisions of CENVAT credit for special CVD are adequate! The pleas
of commerce ministry that there are merchant exporters, service
exporters, small manufacturers who are not in the CENVAT chain, there
are others with surplus CENVAT credit and are unable to get cash
refunds. Even the popular EPCG scheme which allows imports at the low
duty of five percent is subject to the special cvd impost. The prime
minister will have to intervene once again to get the warriors to sign
a temporary truce for the 1 April announcement date of the FTP.
The expectation is that the DEPB will continue for another year but the
measures to promote growth like Target Plus will be fine tuned for
select segments. Mid course corrections and revisions to all the
schemes can be expected, the size of the trade sector is making up more
than 30 percent of the GDP. This will be DGFT Chacko’s last policy. He
will retire from the administrative service this year.
Drawback on re-export: The rate of very short temporary import of
machinery and the like have been bettered. Now 95 percent of the
customs duties will be refunded if the goods are exported within three
months of import. The earlier system allowed only 85 percent refund in
the 0-3 month slab.
The change is good and will promote the temporary import of capital
goods for short term use. The measure is one of the few customs
instruments that actually works well in practice. The refund is
automatically credited in the account of the exporter of the previously
imported goods on the pattern of normal drawback without too many
questions. The customs only satisfies itself that the export goods are
the same as those imported earlier through a check of documents.
