The pandemic brings challenges and opportunities for pharmaceutical companies provided they are ready to face up to them.
Prasad Chandran is an Indian businessman who has been at the helm of 12 different companies. He served as the Chairman of the Board and Managing Director of BASF India Ltd. and associate Chairman of BASF Asia Pacific (India) Pvt. Ltd. To pursue his interest in Nation Building, Prasad Chandran opted to superannuate after 37 years of corporate life and founded SEEGOS, a Social Enterprise which acts as a platform for volunteers from the corporate sector, government organizations, educational institutions, social groups to work together to help India become a Developed Nation in the next two decades. He also serves as the Co-Chairman of the National Committee on Chemicals and Petrochemicals of the Confederation of Indian Industries (CII). He is actively involved through TERI with the National Action Plan on Climate Change, and currently heads the Industry Task Force for Sustainable Agriculture and Green India. He was speaking at the 10th Synergia Webinar focused on “Reimagining industry in an asymmetric, post-COVID world".
Chemical Industry in COVID Times
The chemical industry is the crux of most industries - general chemicals, speciality chemicals, petrochemicals, chemicals used in agriculture, chemicals used in medication, etc. In India, however, the chemical industry was closed down during the Pandemic as it is not classified as an essential sector. This, while chemical factories in the USA, Germany, Japan, and China continued manufacturing.
Indian manufacturers were unable to produce, even if allowed to operate, as their employees were unable to commute due to the total shutdown. Further, essential raw marterials were stuck along the highways, either at state border checkpoints or in trucks abandoned by their drivers.
There is no ‘work for home’ option in any manufacturing sector. The only way out is to ensure all workers are equipped with essential PPE items and the work floor is re-designed to ensure social distancing or allowing staggered shifts to minimise contact. Post-COVID, we could also see the increasing use of technology in production where human intervention is not necessary.
Mr. Prasad opines that with the opening up of the industry, “management has to have two sets of teams. One team looks at the here and now, the immediacy of the issue and the other team looks at the long term, opportunities and solutions.” This would help highlight clearly short term goals and long term goals for the company while keeping in mind the background of the pandemic. The short term group would be focused on upstream suppliers and downstream distributors and how to create alternate supply chains, while the long term team could focus on how to turn the sector into an alternative market to China for countries like the US, Australia, and Europe.
India has been fortunate that it’s food supplies have not been affected as much. The rabi harvest was safely brought in. Nearly 95% of the harvesting has taken place with the record food production of 225 million tonnes of food grains.
The worry factor is the home bound exodus of the migrant labourers, who felt uncared for as guest-workers in other states. When will it be safe for them to return to agriculture intensive states in the West and the South is a vexing question. Local labourers make farming an unviable prospect.
On the legislative side, introduction of three new laws that could help revive the Indian agricultural sector. There are the Essential Commodities Act, the scrapping of APMC (Agricultural Producers Marketing Committee), and the introduction of contract manufacturing into agriculture. “People talk about farmers having one-two acres of very small holdings, but that doesn’t matter, “says Mr. Prasad. “We can have contractual manufacturing where a huge value chain in agriculture can take place.”
Government Control vs Entrepreneurship
The government of India, through its massive financial package to industries, has tried to make the exit from the lockdown as easy as possible. Yet Mr. Prasad opines that the “bureaucracy and the babudom” could come in the way of the full impact. Deep control and licensing should be done away with to allow the sector to grow on its own and at its own pace.
While the Indian government’s plan has been to build a self-reliant India throughout the pandemic, there is much work to do to make this a reality. India has a long history of a dominant State and vast swathes of poverty. ‘Atmanirbharta’ (self-reliance) may seem like a dream when the Centre seeks to control the way production works. The vulnerable citizens end up having to fend for themselves, while those who can afford it seek better alliances overseas to bypass regulations. Remarkably, in this crisis, the non-government civil society has shown that it can help its most vulnerable by providing food, clothes, cash or transport to the stranded migrant labourers.
Mr. Prasad says, “therefore when money is being given, for example, MSME supports that have been given by the banks, it’s now important that this support is given without stakes attached and we must understand that as far as the government is concerned, the important thing to reset our thinking and it must be from a collaborative, cooperative and together approach [...] If that is the case, governments will want to take more and more and we must resist that. And we must take things forward in a collaborative, cooperative and a manner in which we counter the pandemic together. The government bureaucracy must reset their skill sets.” Revamping the Agriculture Sector
The agriculture system is in dire needs for new legislation to replace those crafted in the 1950s and 60s. Prasad Chandran strongly advocates direct linkages between farmers and corporates bypassing the age-old, well-entrenched middle man system. “Whereas once you do what the farmer wants, the customer wants and the world market wants [...] If you can get large industries to come in, if ITC is directly allowed to come in and trade with the farmer, you will find that ITC can get into an NPO and get a price that they want. So, the farmer is benefited, the consumer is benefited, the middle-man gets cut off. So be it. That will change India.”
Aligning New Supply Chains to Consumer Behaviour
Post COVID period will change the way business is done. Established multilateral institutions are being eroded – WTO and NAFTA being two prominent examples and it is still clear where UK stands. Asia appears to be emerging as a front runner in dealing with the pandemic and hence restart its economy before the West.
Mr. Prasad says that the focus is now going to be on “nationalism, localism and WTO globalisation,” which is both a risk and an opportunity. India could change the way it imports as well. “For example Punjab, Haryana has sugarcane, rice, paddy and wheat waste; if the GoI can put some money on research and we can find a better use for bio-waste within the next one and one and a half years, you can have an energy system which completely changes our need to import oil,” muses Mr. Prasad. “So, think global, act local will change to think and act local but with a global perspective.”
Consumerism will change and the American dream is going to change with it. “There will definitely be a change because this is a 1% phenomenon where this 1% population owns about 85% of the wealth of the world. That is what finally consumerism is.” There will be more conservation and more saving instead, as people look for safety in their transactions.
The green revolution changed the face of Indian agriculture raising it from a subsistence level to a driver of economy. Sadly, the sector has failed to adapt to changing times. Considered as a high consumer of natural resources to generate much lesser value, susceptible to climate change with poor flexibility to meet supply –demand variables. It is long due for an overhaul. Hopefully, COVID will provide the necessary impetus.
In the disruptive times ahead, building operations resilence will be critical for survival of industry, both service as also manufacturing. Supply chains will need redesigning, there will be rebalancing of assets base and supplier mix and there will be a trend towards regionalisation of supply chains. In fact this trend had commenced earlier, COVID aftermath will only accelerate it.