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Excessive MRP’s Stiffling
India’s Mfg Growth
Use PRICE CAPPING
For Devices with identical speces &
innovation
BUT
with excessive price disparity
Trade Margin
Rationalization
| |
Indian Manufacturer |
| Cost of Manufacturing |
80 |
| Add Duty 7.5% + GST |
X |
| Total |
80 |
| Add Margin |
20 (20%) |
| Price to Distributor |
100 |
| Add Reseller Margin – 66% |
200 (66%) |
| MRP |
300 |
Trade Margin Rationalization Formula
(2) Imported
| |
Formula (2) Imported |
| Cost of Manufacturing |
80 |
| Add Duty 7.5% + GST |
20 |
| Total |
100 |
| Add Margin |
200 (67%) |
| Price to Distributor |
300 |
| Add Reseller Margin – 66% |
600 (66%) |
| MRP |
900 |
You will notice that Reseller (Dealer /
Hospital / Retailer) will have highest Margin in Formula 2
so they will prefer to sell imported devices
From Table 1, the percentage of tender
deviation is approximately 38% accounting to 80 tenders
which are asking exclusively for foreign regulatory
approvals in India. Of these deviations the GoI or Central
government organizations have shown overall 26% deviation
while Haryana state government alone has shown about 20%
deviation as shown in graph 1 below.
Graph 1: Tender Deviations amongst
State and Central organizations
Trade Margin Rationalization Formula
(1) Imported
| |
Formula (1) Imported |
| Cost of Manufacturing |
80 |
| Add Duty 7.5% + GST |
20 |
| Total |
100 |
| Add Margin |
30 (25%) |
| Price to Distributor |
130 |
| Add Reseller Margin – 66% |
170 (56%) |
| MRP |
300 |
You will notice that Reseller will have
slightly less margin in Formula 1 so may prefer to sell
Indian Devices unless Consumer has strong Brand pull and
insists for imported.
Trade Margin Rationalization
Consumer gets same price for imported
or Indian in formula 1 but pays 3 times Indian prices in
formula 2 but he will not have choice to buy Indian as
Trade / Hospital will push him imported as they make more
money in Formula 2.
| |
Indian Manufacturer |
Formula (2)
Imported |
Formula (1)
Imported |
| Cost of Manufacturing |
80 |
80 |
80 |
| Add Duty 7.5% + GST |
X |
20 |
20 |
| Total |
80 |
100 |
100 |
| Add Margin |
20 (20%) |
200 (67%) |
30 (25%) |
| Price to Distributor |
100 |
300 |
130 |
| Add Reseller Margin – 66% |
200 (66%) |
600 (66%) |
170 (56%) |
| MRP |
300 |
900 |
300 |
So, Formula 1 gives a
minor strategic competitive advantage to Indian Products &
Formula 2 gives major strategic competitive advantage to
importers.
Considering the high
value and importance of medical device equipments in the
field of Radiology and Cardiology, NMDPC has further
assessed deviation of tenders into three categories,
namely – 1. Radiology, 2. Cardiology, and 3. Others. It is
found that of the total deviations 36% of tender
deviations fall under Radiology and Cardiology categories.
Way Forward :
Transparent procurement practices with adherence to Public
Procurement Order 2017 can open a lot of avenues for
Indian manufacturers, provided payments are also settled
with the manufactures in a time bound manner. Secondly,
National Medical Devices Promotion Council realizes that
there is a distinct ecosystem advantage which can be
provided to the medical device stakeholders while
operating out of a cluster, considering Andhra Pradesh
MedTech Zone (AMTZ) as a model cluster where common
resources like infrastructure, scientific facility,
testing facility, sterilization facility, regulatory
enablement and market access are in complete synchrony
with manufacturing. Replicating such clusters and linking
them with each other or linking them to the existing
clusters for enabling smooth flow of services can go a
long way as far as import substitution is concerned, and
thus making the best use of the capabilities which already
exists..
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