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Dishman abandons pharma SEZ plan

By Gareth Macdonald , 12-Jul-2012
Last updated on 12-Jul-2012 at 13:40 GMT

Dishman Pharmaceuticals has abandoned plans to set up a special economic zone (SEZ) citing law changes that make the project less attractive and unfavourable economics as the reasons for the decision.  

The Indian contract research and manufacturing services (CRAMS) began selling the 163 hectares of land it owned at an SEZ in Bavla Taluka near Ahmedabad last week and expects to have completed the divestiture process within six months.

Spokesman Christian Dowdeswell told Outsourcing-pharma.com the decision “follows changes by Government to the benefits of operating within an SEZ, which in combination with economic slowdown make the project unattractive.”

We scrapped plans for our engineering SEZ earlier this year and have now taken the decision to sell the land and exit the project. Dishman SEZ will repay to Dishman Pharmaceuticals & Chemicals Limited Rs100 Crore, some of which will be used for debt repayment.”

The decision is in keeping with the wider trend that has seen the number of SEZ applications submitted to the Indian Government fall from 39 in 2009 to just 14 last year and a steady increase in the number of firms withdrawing from existing projects.

Some observers suggest that changes to the original SEZ model – notably the imposition of taxes, delays to the approval process and the challenge of acquiring a sufficient amount of land – are putting once enthusiastic companies off the idea.

Site status

Dishman started buying land and seeking the necessary approvals for the Pharma and fine chemicals SEZ in 2007 after the Ministry of Commerce & Industry, Department of Commerce (letter No. F.2/355/2006-SEZ) gave the project the green light. Construction work began in 2010.

The idea was to provide plots of land at the site to drug manufacturers wishing to access the Indian market with companies like Solvay, Johnson & Johnson, Lonza and Bayer as well as home-grown firms like Sun Pharma rumoured to have expressed an interest .

Dowdeswell declined to comment when asked if any of these companies had set up at the SEZ.

Neither did he say if Dishman will consider resurrecting the project if economic conditions improve or if the SEZ model is revamped, instead saying that any such move “would have to be evaluated at the time.”