ImageSeveral companies in Latin America, Asia and the CIS countries that import Indian drugs and FMCG products are defaulting, deferring payments and asking the Indian suppliers to lower prices. This is because they are unable to meet payment commitments due to sharp depreciation of their respective currencies against the US dollar, making imports costlier in their local currency.

Local currencies of Ukraine, Russia, South Africa and Brazil fell by around 50%, 37%, 45% and 40%, respectively, against the dollar in the last 4-5 months after the financial crisis broke out in September 2008. Approximately half of $7.2-billion Indian drug exports go to these developing countries, mostly supplied by small and mid-sized pharma companies.

Indian Drug Manufacturers Association (IDMA) president, Daara Patel, said: “Pharma exports may drop by around 10% during the quarter compared with the same period last year. Some of the buyers in these countries have even asked to cancel or postpone pending orders as they are struggling to make payments. But we can’t hold back the consignment as each country has different labelling requirement.”

In a letter to the commerce ministry, IDMA’s international export chairman DB Mody said Indian companies were also facing a drop in rupee earnings, despite depreciation of Indian currency against the US dollar. This is because drug companies had taken forward cover at around Rs 40-42 to a dollar in anticipation that the rupee would strengthen further after it had touched Rs 39 early last year. But the rupee swung the other way.