China’s dumping of Isopropyl Alcohol can disrupt the resilience of India’s pharma supply chain

China's dumping

By Manoj Dinne

It was not long ago when overreliance on the Dragon for the vital drug Penicillin G (Pen-G) left deep scars on the Indian Pharmaceutical industry.

Even today, India remains handicapped in the antibiotics sector due to China’s flooding of the market with cheap imports during the early 2010s. The flood of Chinese antibiotics led to the shutdown of domestic producers.

Pen-G Dumped by China
Southern Petrochemical Industries Corporation Ltd (SPIC), once a market leader in penicillin products and one of the few Penicillin-G manufacturers in India, closed their production in 2011.

In their annual report FY2012, the company said: “The plant could not be restarted and the operations were discontinued due to competition from cheap Chinese imports, low market prices, high cost of inputs and non-imposition of anti-dumping duty.”

India was unable to provide safeguards to Indian industry under the onslaught of dumping by the Chinese. Destroying our industries, especially critical industries such as pharma, is war by other means.

Similarly, other Pen-G manufacturers gave in, setting in a crucial chain reaction, and pushing India towards a precarious reliance on China for these life-saving supplies.

A recent report by CareEdge shows that 43% of total pharma imports in India come from China, this indicates the extent of dependency between the two countries amidst rising geopolitical tensions and a slowdown in the Chinese economy.

A parallel threat is now looming in India and this time it is Isopropyl Alcohol (IPA). This chemical finds its usage predominantly in the solvent industry in sectors such as pharmaceutical, household, cosmetics, personal care and in addition to being used as an intermediate for the production of pesticides, dyestuff, water treatment agents and detergents.

Consistent Surge in Chinese IPA Exports
The genesis of this crisis can be traced back to the steady climb in exports to India starting from 8% in FY17 to a staggering 57% in FY20 in the absence of any trade measures. In 2020, as the COVID-19 virus continued to spread in India, the situation took a turn for the worse.

When India was grappling with ballooning demand for IPA, a critical chemical in the pharmaceutical and Sanitizer sector, China, a major supplier to India, followed the strategy of safeguarding its domestic needs, leaving India high and dry at a time when the virus was spreading.

It is noteworthy that sanitisers contain more than 60% IPA, making them indispensable in tackling germs and viruses.

In 2023, when COVID eased out, the exports went to 64% (higher than pre-pandemic levels). This established beyond doubt that China had played IPA hide and seek with India during COVID.

Battling the Storm
Given the backdrop of this tussle, a beacon of hope emerged when the Directorate General of Foreign Trade’s (DGFT) Safeguard Quantitative Restriction (SG QR) was implemented in 2023, leading to a decline in the IPA imports to 38% FY 24. This measure brought temporary respite to the industry. However, the battle is far from over as SG QR is a stop-gap measure.

As the West decouples from China, it is easy to go to default settings and start dumping on India at predatory prices. This would have devastating consequences for India’s domestic players.

IPA is an indispensable chemical in the pharmaceutical supply chain, with more than 80% of consumption dedicated to life-saving products. The list includes drugs such as ear drops, hand sanitisers, disinfectants, alcohol swabs, and wound cleaning wipes. IPA is also used in capsules and tablets and plays an integral part in the medical ecosystem. Threat to domestic IPA manufacturers will lead to disruption of the entire supply chain.

The call for fortifying India’s pharma supply chain is the need of the hour to ensure we are not dependent on other nations for these life-saving chemicals.

To make the country Atma Nirbhar in the IPA sector, anti-dumping duty must be implemented. A country like India, which is often regarded as the pharma capital of the world, can’t afford to have weak supply chain resilience.

This article first appeared in ET Government,