By Rakesh Dubey, Bhopal
The conflict in the Gulf involving the United States, Israel and Iran is no longer confined to energy markets. Its effects are now being felt across agriculture and, more acutely, the pharmaceutical industry, with manufacturing clusters in Himachal Pradesh and Haryana coming under growing pressure.
These regions account for a significant share of India’s drug production, particularly through small and medium enterprises. The continuing instability in West Asia has disrupted the supply of essential inputs — active pharmaceutical ingredients (APIs), solvents and petrochemical derivatives — many of which either originate in the region or transit through shipping lanes exposed to the conflict. The result has been a sharp increase in prices. In some categories, raw material costs have risen by as much as 30 per cent, driven by both logistical constraints and volatility in energy prices. Packaging materials, which are largely petroleum-based, have also become substantially more expensive.
The industry, already operating on thin margins due to intense competition, is now facing heightened stress. The impact, however, is not limited to costs. Migrant workers, on whom many units are heavily dependent, are experiencing growing insecurity. Disruptions in fuel availability and the supply of small LPG cylinders are affecting their daily living conditions and the stability of their employment. For manufacturers reliant on this workforce, the situation risks creating productivity bottlenecks. The resilience of the sector depends as much on the welfare and confidence of its workers as on the integrity of its supply chains.
The dual pressure is particularly evident in Himachal Pradesh’s Baddi-Barotiwala-Nalagarh belt and in Haryana’s pharma clusters. Rising production costs are forcing smaller manufacturers either to scale back output or absorb losses. At the same time, higher input prices and elevated global freight rates are eroding export competitiveness.
The episode has once again underlined India’s structural dependence on imported raw materials and extended global supply chains. While the central government’s decision to grant duty relief on certain imported inputs has provided limited short-term relief, more sustained measures will be required. These include diversifying sources of supply, expanding domestic API manufacturing capacity, and strengthening social security provisions for migrant workers.
In practical terms, a conflict being fought far from Indian shores is now testing both the country’s pharmaceutical supply system and the capacity of its manufacturers to absorb external shocks.