China’s price war hits Indian Active Pharmaceutical Ingredients industry

China’s decision to slash the prices of Active Pharmaceutical Ingredients (APIs) by as much as Rs 7,000 per kg has hit hard the competitiveness of the Indian API industry. An API is a core component of a medicine that has an intended therapeutic impact.

China has specifically targeted 41 APIs and key starting materials by slashing their prices by 40 per cent to 50 per cent. The aim of the move is to cripple the API plants in India that commenced production in November 2024, says the industry sources.

China, following an aggressive pricing strategy, has slashed the rates of key raw materials (Clavulanate Potassium and Penicillin-G), bringing them below even the production cost. The prices of these critical APIs have plunged by around Rs 7,000 per kg, severely hitting the competitiveness of Indian manufacturers, say industry sources.

The Union Government has introduced a Production Linked Incentive (PLI) scheme to reduce dependence on Chinese imports, which was a whopping 68 per cent, and boost domestic manufacturing of APIs. The step was taken after the Covid-19 crisis when the API shortage had severally impacted the pharma sector. As a result, new API plants were set up in Himachal Pradesh, Telangana, Gujarat and Uttarakhand with investments worth hundreds of crores of rupee.

“As production increased in these units, self-reliance in the pharmaceutical industry was building. But China’s aggressive dumping policy and the sudden move to slash the prices of key APIs have dealt a severe blow to these emerging units. Several facilities are already running in losses, while others are caught in a crisis even before operations could fully start,” said the sources.

China has slashed the price of Clavulanate Potassium by 40 per cent and Penicillin-G by 50 per cent. Two key factories in Himachal and Telangana, which are the largest API units established under the PLI scheme, are encountering serious challenges even before they could have full-scale operations due to China’s move.

Industry experts believe China is deliberately waging a price war to tighten its grip on the global API market where India is a key player. “As the production cost is higher in India, domestic manufacturers are finding it impossible to match such artificially suppressed prices. However, it remains to be seen whether China can continue with such low rates for long,” says a key API manufacturer.

API manufacturers also recall how a similar move by China to introduce cheaper APIs about two and a half decade ago had crippled the domestic pharma industry, leading to the closure of major manufacturing units.

Indian pharma associations have urged the Central Government to step in and raise import duties on Chinese APIs while accelerating anti-dumping investigations, extending additional subsidies to PLI scheme beneficiaries and giving priority to domestic API manufacturers in government procurement. This will provide immediate relief to domestic manufacturers. According to sources, a proposal is under discussion and initially, eight to 10 critical APIs, which China is targeting, may be brought under the minimum import duty regime.

• Serious challenge

  China has targeted 41 APIs and key starting materials by slashing their prices by 40 per cent to 50 per cent. The aim of the move is to cripple the API plants in India.

• Two key factories in Himachal and Telangana, which are the largest API units set up under the Production-Linked Incentive scheme, are encountering serious challenges
• Industry experts believe China is deliberately waging a price war to tighten its grip on the global API market.
• Indian pharma associations have urged the Centre to step in and raise import duties on Chinese APIs while giving priority to domestic API manufacturers in government procurement