India’s opium processing market, always known for its stringent regulations, has finally opened up to private players. The first private one to get on board is Bajaj Healthcare.
Given the huge potential in terms of revenue and profit margins, this market could prove to be a game changer, especially for pharmaceutical giants.
Bajaj Healthcare will now supply opium-derived alkaloids and active pharmaceutical ingredients (API) to the government of India. The government, in turn, will provide the alkaloids, such as morphine and codeine, to the pharmaceutical industry. The pharma companies will use the opium derivatives to manufacture pain relievers, particularly those used in the treatment of terminal cancer, accident-related trauma and chronic pain.
Bajaj Healthcare has been awarded two government tenders for the manufacture of concentrated poppy straw (CPS) alkaloids and active pharmaceutical ingredients (APIs) from unlanced poppy capsules.
CPS is a mechanised system under which the entire harvest is cut by machine and transferred to factories for alkaloid extraction.
This is a landmark change in India’s approach to opium processing, which has hitherto been handled solely by the Government’s Opium and Alkaloid Factory (GoAF).
The state-owned undertaking’s two factories, located at Ghazipur, Uttar Pradesh, and Neemuch, Madhya Pradesh, are the only buyers of opium produced by poppy farmers.
A Rs 1,000 crore-plus market
Speaking to Moneycontrol, Anil C Jain, joint managing director of Bajaj Healthcare, said that the opiate business market in India is worth more than Rs 1,000 crore.
“The government is producing 500-700 metric tonnes but the demand is more. The margin is somewhere between 20-25% of EBITDA. The government is importing opium from outside India to meet the increasing demand. Private players can only meet the gap between demand and supply,” Jain added.
Of the various Alkaloids, Codeine Phosphate is required in the largest quantity in India, said government officials. The total production of codeine phosphate by the government factories is not sufficient to meet India’s needs. So, the government has to import Codeine Phosphate every year.
Sri Hari, a pharma analyst with PCS Securities, Hyderabad, said that while the move by the government is pathbreaking, unless the marketing rights are made public, it will be tough to comment on how things will pan out.
A strictly regulated business
The opium business is strictly regulated in India because it is one of the countries authorised by the International Narcotics Control Bureau (INCB) to produce opium for the manufacture of alkaloids used in the pharmaceutical industry.
“If there is no regulatory authority for the production of opium, it will get diverted into illegitimate hands and will be misused for production of illicit drugs such as methamphetamine and heroin, which are a major menace in the country,” said a former head of the Revenue Department of the Finance Ministry.
Talking about deregulation for processing, Captain Sanjay Gehlot, former Principal Commissioner, Customs (IRS), said, “This is an excellent initiative, especially if they are going for CPS technology because it is efficient and it eliminates the possibility of opium diversion — because opium does not appear at any stage in this process.”
“When I was chief controller of the government opium and alkaloid factories between 2018 and 2021, I had initiated work on the expression of interest (EoI) invitation to the private sector for opium processing. I am glad that it has seen fruition finally,” he told Moneycontrol.
Usage of narcotic alkaloids by the pharma sector
Bajaj Healthcare joint MD Jain said this is the first time the government has allowed private players to enter this market.
“This type of market needs to be regulated as there are high chances of trafficking and we are taking help from professionals to ensure that all the safety checks are in place,” he added.
A variety of products, including cotarnine, dionine and other alkaloids, which are derived from opium, are sold to the pharmaceutical industry, which mostly utilises them in cancer and pain-management drugs.
Move to reduce import of opium
Praveen Sikri, CEO, Ikris Pharma Network, hailed the government's decision to allow private players into the business, saying it is a very positive development from the standpoint of self-reliance.
“Since alkaloids and APIs are byproducts of opium processing, the increased production will prove to be a booster shot in terms of the availability of APIs in India,” he explained.
Sikri believes that the government will allow more private players into this field in the coming years.
According to a Finance Ministry response in the Lok Sabha, opium produced in the country for extraction of alkaloids is meant for domestic use only and is not exported.
Concentrate of poppy straw (CPS) technique
India is one of the few countries permitted to cultivate opium poppy. Until now, the production method involved lancing the pods of the poppies to extract alkaloids from the opium gum for medicinal purposes.
The shift to the CPS technique aims to increase production of alkaloids and completely eliminate diversion of legally produced opium.
Moneycontrol has sent a questionnaire to Dr Reddy's Laboratories and Sun Pharma in connection with this development and is awaiting their responses.
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