Drug companies shift base to Karnataka?

With a slew of incentives from the Karnataka government, the bulk drug manufacturers in Telangana are planning to shift to the neighbouring state. The announcement of industrial parks by the Telangana government has cut no ice it seems as pharma companies are showing interest to set up shop in Karnataka. RK Agarwal, general secretary, Bulk Drug Manufacturers Association (BDMA), says, “It is the individual decision of companies but it does not come as a surprise. Recently there was a team from Karnataka. If manufacturers get a good deal they will move out.”

“Around 33 pharma companies including Virupaksha Organics, Gowra Petrochemical Industries, Optimus Drugs and Hetero Labs have shown interest in setting up manufacturing plants in Karnataka. This curiosity is mainly because of the incentives the State is throwing at them in an effort to meet a target of attracting Rs 5 lakh crore in pharma investments,” stated a report in Money Control.

What is surprising is the fact that most of the 33 companies have manufacturing plants in the city and none have reservation in crossing over. "We are interested in shifting to Karnataka and the government is presently offering 50 percent tax benefit. The land rate is also cheaper than Telangana and Andhra," Ramakrishna Jami, MD, Vyas Bio Life Sciences, said.

The 33 companies on the list are expected to finalise agreements with the Karnataka government by the end of December and the State is busy getting the groundwork in place, especially when it comes to land. For starters, Karnataka plans to allot over 400 acres of land to the pharma sector in the Hyderabad-Karnataka region. This will cost the State over Rs 1,500 crore. That's because while the Telangana government offers 1 acre of land for about Rs 35 lakh, the Karnataka government will offer one acre of land for just Rs 7 lakh.

Karnataka also allows the companies to make this payment over a five-year period. The State has promised to throw in the necessary infrastructure that these pharma companies will require for faster commencement of operations.
Karnataka government officials say these incentives will only get more companies interested.

K Ratna Prabha, additional chief secretary, Karnataka, said, "About 53 pharma companies want to come and set up manufacturing units. Most of them are small and medium. Some of them are large. 33 have already applied and their projects are cleared. Final payment of lands is going on."

Karnataka’s incentives to pharma companies

• 100 per cent exemption of stamp duty on registration of loan agreements and land registration
• 100 per cent reimbursement of land conversion fee
• 100 per cent exemption on entry tax
• 50 per cent capital subsidy on setting up effluent treatment plants
• 100 per cent tax exemption on electricity tariffs
• 25 per cent investment subsidy on upgrading technology
• A liberal interest subsidy on loans depending on the size of the investment.