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Express Tribune
3 days ago
- Business
- Express Tribune
'52% duty cut to boost exports'
Listen to article The government on Wednesday claimed a drastic 52% cut in import duties will lead to exports rising faster than imports, while revenues will grow by one-tenth. However, it admitted these projections are based on calculations by the World Bank. Proceedings of the National Assembly Standing Committee on Finance revealed that the government is venturing into uncharted territory, largely relying on the World Bank's Global Trade Analysis Project (GTAP) model. The committee was briefed by the Ministry of Commerce on the new National Tariff Policy, which is being described as "Pakistan's East Asia moment" aimed at increasing exports and reducing the trade deficit. Under the new policy, the average applied tariff rate will fall from 20.2% to 9.7% over five years — a 52% drop — Secretary Commerce Jawad Paul told the committee. He claimed exports will rise at twice the pace of imports due to tariff reforms. According to the GTAP model, exports are expected to grow 10-14%, while imports would rise only 5-6%, said Paul, adding this would help improve the trade deficit despite a lower protection level. When asked about these projections, Finance Minister Muhammad Aurangzeb said, "These are assumptions — some may work and some may not." Leader of the Opposition Omar Ayub Khan raised concerns about the implications of reduced tariffs on reserves, inflation, exports, and imports. He questioned the assumptions behind the optimistic forecast and asked how such drastic tariff cuts could lead to higher exports without hurting reserves. The government failed to provide clear answers and admitted that the World Bank developed the numbers using its GTAP model. Khan demanded the model be shared with the committee. The government did not present the model at the meeting and instead promised a separate briefing by the World Bank and commerce minister. Khan insisted the briefing be open to the media, but Aurangzeb said the World Bank may not agree. Concerns were raised over foreign consultants using a one-size-fits-all approach that ignores Pakistan's ground realities. Officials from the finance ministry, Federal Board of Revenue (FBR), and commerce ministry could not clearly explain the impact on inflation, imports, reserves, or fiscal balance. "Trade tariff reform will be painful as inefficient firms will shut down," said FBR Chairman Rashid Langrial. Secretary commerce said that in the first year (FY26), the tariff rate would drop to 15.7%, cutting the protection wall by 22.3%. This will be achieved by reducing average custom duty to 11.2%, additional custom duty to 1.8%, and regulatory duty to 2.7%. PPP MNA Nafisa Shah noted that while the world is moving towards protectionism, Pakistan is granting unilateral concessions by reducing tariffs. Pakistan's issue has been high tariffs, and despite concerns, there is a need to lower protection under the Most Favoured Nation (MFN) regime of the World Trade Organisation (WTO), said Paul. He added that financial resources will shift to efficient sectors as export production increases. The industry will expand, jobs will grow, and investment will strengthen. The committee was told revenues would rise 7-9%, versus an estimated Rs500 billion loss in static calculations. For FY25, the FBR projects a net revenue gain of Rs47 billion, factoring in a Rs235 billion hit from tariff cuts. Gains would come from other changes, including Rs27 billion from easing age limits for used car imports. Paul said various models including macro, export forecasting, and GTAP showed a Rs500 billion static loss from tariff changes. But when adjusting for factors like demand, transparency, smuggling reduction, and compliance costs, GTAP forecasts a 7-9% revenue gain. He said three additional goals are part of the new tariff policy: export-led growth through level playing fields; support for green initiatives and energy-efficient industry; and promotion of advanced technologies like AI, robotics, nanotech, electronics, and chemicals. Additional customs duties will be phased out in four years, regulatory duties in five years, and exemptions within five years. The number of slabs will shrink to four, with a top rate of 15% within five years. Auto sector products with 35% custom duty are covered under the Auto Policy. These duties will be phased out from July 1, 2026, said Paul. Auto sector tariffs will be rationalised to enhance competition, productivity, and consumer welfare. Quantitative import restrictions on old and used vehicles, subject to quality and environmental standards, and the differential tariff structure will also be eliminated. A new Auto Policy will begin July 1, 2026, featuring major duty reductions and review of SRO 655, SRO 656, and removal of all ACDs and RDs. Products with no concessions under the 5th Schedule will move to the 1st Schedule. Items with concessionary rates will also shift to the 1st Schedule, either under MFN rates or the closest existing slab. The FBR and commerce ministry assured the committee that no new duties will be imposed on agricultural machinery and that all existing duties are trending downward. Finance Minister Aurangzeb said a committee under his chairmanship has been formed to monitor implementation of the new tariff policy and make adjustments as needed. "If raw material tariffs are reduced, it will help, otherwise industries will collapse," said PTI's Mubeen Arif Jutt. Immediate changes In the budget, the commerce ministry has proposed eliminating the 2% additional duty on zero custom duty slabs, affecting 2,156 tariff lines. The 3% custom duty will drop to 0%, lowering costs on 896 tariff lines. Similarly, the 11% CD will fall to 10% on 1,023 lines, and the 16% CD will reduce to 15% for 486 lines. Additional custom duty rates have been cut by 1% for the 7% slab; the 6% rate drops to 4%, and the 4% rate drops to 2%. The 2% ACD slab has been scrapped entirely.
Time of India
03-06-2025
- Business
- Time of India
Trump's prescription drug price cuts unlikely to hit Indian pharma exports significantly: Crisil Ratings
US President Donald Trump 's executive order on reducing prescription drug prices will have a limited impact on Indian pharma companies, according to a report by Crisil Ratings . Citing the reason behind its observation, the credit rating firm in its report said that despite India exporting over half of its pharmaceutical output, the bulk comprises low-priced generic drugs, which already operate on razor-thin margins, leaving little room for further price cuts to materially affect revenues. In over half of the pharmaceutical output, one-third goes to the United States. India exports 54 per cent of its pharmaceutical production, of which nearly a third is to the US. Around 85 per cent of the exports to the US comprise formulations, largely generics, while sales from biosimilars and innovator drugs remain low. Also Read: US FDA approves Moderna's next-gen COVID vaccine for adults 65 or older Generic pharma drugs account for 90 per cent of the prescription sales volume but only 13 per cent of the value spending in the US. Generic drug prices in the US are very low and have lower prices in comparison to economically peer countries. Live Events The executive order issued in the United States aims to reduce the prices of prescription drugs by 30-80 per cent through the adoption of a Most Favoured Nation (MFN) pricing model. The US Department of Health and Human Services (HHS) has outlined the initial steps to be taken to implement this policy, involving identification of manufacturers expected to align the prices of branded products, which do not currently have generic or biosimilar competition, with the lowest price among a set of economic peer countries of the US. Trump's executive order primarily targets high-margin branded innovator drugs and excludes generics and biosimilars. "The MFN model is unlikely to significantly affect the bulk of India's exports," the report added. Also Read: Zydus gets USFDA nod for generic IBS-D treatment drug It further added, "However, potential indirect impact, through lower growth prospects for upcoming generic versions of innovator drugs going off patent, due to lower price differential post price reductions of the innovator drugs, would bear watching." However, a few formulation companies with niche presence in the branded innovator drug segment can face some pricing risk. "API exports (15 per cent of India's pharma exports) are expected to be broadly unaffected, as it is not a major cost for high-margin originator drugs, abating concerns of pricing pressure," the report added. Additionally, the policy may create opportunities for contract manufacturing organisations, which constitute 8 per cent of India's pharma market. "The policy may create opportunities for CMOs ( 8 per cent of India's pharma market), with orders expected to improve as global pharma companies seek to lower production costs by outsourcing. While this could support volumes, the pressure on pricing may result in renegotiation of contract rates, compressing margins," the report further added.
Yahoo
21-05-2025
- Business
- Yahoo
Can pharma tariffs 'Make America Manufacture Again'?
As President Trump continues to signal import tariffs on pharmaceuticals to bolster US manufacturing, experts warn this could hike costs and crush biotech, but also spur reconsideration of biopharma production. Following blanket 'Liberation Day' tariffs announced on April 2, Trump stated at an April 6 fundraiser, 'We're going to be announcing very shortly a major tariff on pharmaceuticals; and when they hear that, they will leave China.' While there have been no details released since, the administration has announced other policies like an executive order on the Most Favoured Nation (MFN) model, which, if enforced, will also have a major impact on US pharmaceuticals. The US imported a total of $213 billion in pharmaceuticals during 2024, according to the UN Comtrade database. India and China are major suppliers of active pharmaceutical ingredients to the US and the various geopolitical actions, including tariffs, are expected to have implications including potentially higher costs for drugs with more on-shore manufacturing, as per a GlobalData Strategic Intelligence report. GlobalData is the parent company of Pharmaceutical Technology. For these countries and others, no tariffs are currently imposed on pharma products. As the sector waits for more clarity, experts question if pharma tariffs will coax manufacturers to the US from abroad and instead warn they are likely to simply disrupt the industry, hitting biotech hardest. Tariffs on pharma imports, as a measure to encourage nearshored manufacturing, are more than offset by the costs of relocation for drug companies, as per Mina Tadrous, assistant professor of drug policy at the University of Toronto in Canada. Tadrous describes Trump's proposed tariffs as 'an attempt to have a very simple, shortcut, aggressive policy that doesn't actually address the real issue,' which he says is the vast time and money needed to establish US-based pharma manufacturing. The time taken to recoup these costs ranges from 8–10 years, well over Trump's remaining time in office, according to Nilanjan Banik, PhD, professor of economics at Mahindra University, Hyderabad, India. Banik does envision long-term relocation, not to the US, but from high-tariff to low-tariff countries, highlighting Apple's plans to move phone production from China to India. But Tadrous says that with this strategy of supply chain optimisation would come a risk of supply disruption and subsequent drug shortages. However, there are signals that pharma companies are preparing to nearshore operations in the US, according to John Singer, founder of life sciences consultancy Blue Spoon Consulting. He notes Eli Lilly's commitment to invest an extra $27 billion in US plants, in February. Since then, Novartis, Sanofi, and others have made similar pledges. 'Part of me also believes that a lot of this is just political signaling,' says Tadrous. He posits that companies may be making unbinding commitments to curry favor with the current administration, able to backpedal should tariffs be dropped. In Singer's view, the MFN executive order is evidence of Trump's unpredictable stance towards pharma and a cue for companies to avoid committing too heavily to nearshoring production. Nearshoring of manufacturing has been on the rise before Trump's tariffs were proposed. 'In the Biden administration, there was a push to have more nearshoring,' Tadrous states. 'The Europeans are also doing the same things. Canadians have been thinking about it as well.' He says drug shortages in recent years, most starkly seen during the Covid-19 pandemic, made clear the vulnerabilities in drug supply for many regions and spurred governments to seek greater independence of production. Despite growing regional focus, Banik maintains that the US is still the pivotal market for pharmaceuticals as the world's greatest drug consumer. He estimates tariffs may amount to as low as 20% of manufacturers' marginal costs as an added expense of producing pharmaceuticals for the US. Even with import tariffs, the country is too profitable for pharma and biotech to ignore. However, it is unclear if the US can successfully compete as a broad drug manufacturer. For Banik, many Asian countries hold too strong an advantage in generics manufacturing due to low labour costs and growing specialist talent pools for the US to challenge them. But for biologics and other advanced therapies, Tadrous says the US is well positioned to build on its already strong production capabilities. Should Trump commit to competing for generics production with these countries, he runs the risk of incurring medicine shortages in the US, states Thomas Roades, biopharma policy researcher at the Duke-Margolis Institute for Health Policy in Durham, North Carolina. According to Roades, competition and supply contracts require generics manufacturers to keep prices so low that tariffs may lead them to discontinue certain drugs that have low or no profits, even if they are essential to many patients. Big pharma may be able to reoptimise supply and make gestures towards nearshoring, but for smaller biotechs, tariffs pose an existential threat, according to Jon Ellis, CEO of the Sacramento, California-based cell and gene therapy (CGT) manufacturing specialist Trenchant Biosystems. In his view, the loss of these cutting-edge drug developers would spell a sharp downturn in future innovation, a mantle larger pharma is ill-suited to take up. 'It's not necessarily the impact of tariffs, it's the instability that's caused by not knowing what's going on,' Ellis says. This period of uncertainty, archetypal of Trump's policy, dissuades unsure investors from betting on emerging advanced therapies. Should funding opportunities diminish even further under tariffs, Ellis sees larger companies cheaply buying up broad swathes of biotech, strengthening big pharma's clinical pipelines and R&D at the expense of the sectors' most innovative small players. Singer believes there is reason to suspect the US may risk losing its status as the go-to market for biotech. Innovators, who would otherwise chase FDA approvals, might consider looking to other markets should tariffs prove too constrictive to US business. But for now, Ellis maintains, 'The value of the US is still too great for people to turn off, and I think people in the US will find a way of continuing to innovate.' There is a potential tariff workaround employed by biotechs: regionalised manufacturing. Manufacturing advanced cell and gene therapies for US patients, in particular, already occurs largely in the US, Ellis points out, as these require time-sensitive, cold-chain transport which precludes lengthy international supply. According to Singer, a more regionalised approach to manufacturing could see broader adoption throughout biopharma under US tariffs. However, what works for small biotechs may not on a larger scale. 'If you have any problems setting up manufacturing in one location…50 locations is going to be complicated,' notes Jason Jones, global business development lead at Cellular Origins, a developer of robotically automated CGT manufacturing. Beyond logistics, Jones adds that large producers would have to contend with differences in regional regulation which would place limits on how regional their manufacturing could become while remaining practical. Singer says pharma is exploring innovative ways to manufacture and distribute their products, pointing to Eli Lilly's digital healthcare platform LillyDirect. This service offers users access to healthcare support and, crucially, home delivery of Eli Lilly medicines. In Singer's view, big pharma's forays in direct-to-consumer platforms are emblematic of an industry seeking independent control over its manufacture and distribution. "Can pharma tariffs 'Make America Manufacture Again'?" was originally created and published by Pharmaceutical Technology, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
19-05-2025
- Business
- Time of India
Shapoorji Group Seeks 3-year Reprieve for NBFC
Shapoorji Pallonji Group has asked the Reserve Bank of India (RBI) to give its unit, Sterling Investment Corp , three years to meet enhanced capital adequacy norms in relation to a recent bond issue, said people with knowledge of the matter. Sterling was recently reclassified as a mid-layer NBFC, facing stricter regulatory requirements. RBI has raised concerns over its capital adequacy — tier I-II capital ratios are required to be at least 15% of risk-weighted assets. SP Group has just raised ₹28,500 crore ($3.3 billion) backed by Sterling Investment, a non-banking finance company (NBFC) holding 9.18% stake, valued at $18.6 billion, in Tata Sons. The collateral is meant to reassure investors and support the deal. Shares held by Sterling reflect the historical value of Tata Sons shares; true value will be reflected only in the event of a listing of the Tata group holding company, a banker said. SP Group holds 18.37% in Tata Sons, valued at over $37.4 billion (₹3.2 lakh crore). Shapoorji Pallonji Group has pledged the entire stake as collateral in multiple fundraising transactions. The group will have to secure RBI approval for the three-year deferment within four months of the issuance date, said people close to the matter, failure to do which would constitute a default on the borrowing. The deal was signed on May 15 and settlement is expected to close on May 21, as reported by ET. 'Within four months of the issuance date, SP Group will have to secure approval from RBI for an extended timeline to meet capital adequacy norms under current NBFC regulations,' SP Group has informed investors, according to an official close to the matter. The deal includes stringent creditor protection clauses, including a Most Favoured Nation (MFN) clause—mandating a coupon step-up if future borrowings are priced higher—and a 1% coupon increase in case of covenant breaches. The group faces a repayment obligation of ₹51,000 crore after three years, having recently raised money at a steep yield of 19.75%. As part of the financing structure, SP Group has committed to listing real estate arm Shapoorji Pallonji Real Estate, and raising ₹13,000 crore through asset monetisation within 24 months. Any delay in meeting this timeline would also trigger a default. Large credit funds including Ares Management, Farallon, Davidson Kempner, Cerberus, Pimco, and BlackRock are participating in the debt raise, with Deutsche Bank acting as the sole arranger. The final redemption date for the debentures will be the earlier of—one month prior to the expiry of the RBI extension timeline for capital to risk weighted assets ratio (CRAR) compliance, or three years from the issue date, according to the term sheet reviewed by people cited earlier. SP Group declined to comment. The transaction implies a loan-to-value (LTV) ratio of roughly 14.7%, according to the company's communication to investors. In addition to the Tata Sons stake, the group has also pledged shares of Shapoorji Pallonji Real Estate, valued at $3.2 billion, as part of the funding arrangement. An official close to the lenders said none of them are disputing or discounting the value of the Tata Sons shares. 'Of course, lenders will demand their pound of flesh as the shares are seen as illiquid as of today,' the person said. 'The regulator's decision is awaited on the matter, which will clearly change everything for lenders and investors. There is substantial value in the real estate monetisation plan, which will also serve as liquid collateral post-listing.' SP Group has also urged RBI to support a public listing of Tata Sons, stating that such a move would benefit all stakeholders, including the public. According to people aware of developments, the group has formally communicated this view to the regulator and is relying heavily on the possible listing to improve its financial position. Struggling under a substantial financial burden, SP Group also expressed its concerns to Tata Sons about not being informed of the company's decision to surrender its registration as an upper layer core investment company to RBI. As an 18.37% minority shareholder in Tata Sons, SP Group had reportedly raised its worries about being excluded from discussions on such a strategically important decision.
Time of India
19-05-2025
- Business
- Time of India
Shapoorji Pallonji asks RBI for three-year relief on Sterling Capital rules
Mumbai: Shapoorji Pallonji Group has asked the Reserve Bank of India ( RBI ) to give its unit, Sterling Investment Corp , three years to meet enhanced capital adequacy norms in relation to a recent bond issue , said people with knowledge of the matter. Sterling was recently reclassified as a mid-layer NBFC, facing stricter regulatory requirements. RBI has raised concerns over its capital adequacy — tier I-II capital ratios are required to be at least 15% of risk-weighted assets. SP Group has just raised Rs 28,500 crore ($3.3 billion) backed by Sterling Investment, a non-banking finance company (NBFC) holding 9.18% stake, valued at $18.6 billion, in Tata Sons. The collateral is meant to reassure investors and support the deal. Shares held by Sterling reflect the historical value of Tata Sons shares; true value will be reflected only in the event of a listing of the Tata group holding company, a banker said. Agencies SP Group holds 18.37% in Tata Sons, valued at over $37.4 billion (Rs 3.2 lakh crore). Nod Within Four Months Shapoorji Pallonji Group has pledged the entire stake as collateral in multiple fundraising transactions. The group will have to secure RBI approval for the three-year deferment within four months of the issuance date, said people close to the matter, failure to do which would constitute a default on the borrowing. The deal was signed on May 15 and settlement is expected to close on May 21, as reported by ET. 'Within four months of the issuance date, SP Group will have to secure approval from RBI for an extended timeline to meet capital adequacy norms under current NBFC regulations,' SP Group has informed investors, according to an official close to the matter. The deal includes stringent creditor protection clauses, including a Most Favoured Nation (MFN) clause—mandating a coupon step-up if future borrowings are priced higher—and a 1% coupon increase in case of covenant breaches. The group faces a repayment obligation of Rs 51,000 crore after three years, having recently raised money at a steep yield of 19.75%. As part of the financing structure, SP Group has committed to listing real estate arm Shapoorji Pallonji Real Estate , and raising Rs 13,000 crore through asset monetisation within 24 months. Any delay in meeting this timeline would also trigger a default. Large credit funds including Ares Management, Farallon, Davidson Kempner, Cerberus, Pimco, and BlackRock are participating in the debt raise, with Deutsche Bank acting as the sole arranger. The final redemption date for the debentures will be the earlier of—one month prior to the expiry of the RBI extension timeline for capital to risk weighted assets ratio (CRAR) compliance, or three years from the issue date, according to the term sheet reviewed by people cited earlier. SP Group declined to comment. The transaction implies a loan-tovalue (LTV) ratio of roughly 14.7%, according to the company's communication to investors. In addition to the Tata Sons stake, the group has also pledged shares of Shapoorji Pallonji Real Estate, valued at $3.2 billion, as part of the funding arrangement. An official close to the lenders said none of them are disputing or discounting the value of the Tata Sons shares. 'Of course, lenders will demand their pound of flesh as the shares are seen as illiquid as of today,' the person said. 'The regulator's decision is awaited on the matter, which will clearly change everything for lenders and investors. There is substantial value in the real estate monetisation plan, which will also serve as liquid collateral post-listing.' SP Group has also urged RBI to support a public listing of Tata Sons, stating that such a move would benefit all stakeholders, including the public. According to people aware of developments, the group has formally communicated this view to the regulator and is relying heavily on the possible listing to improve its financial position. Struggling under a substantial financial burden, SP Group also expressed its concerns to Tata Sons about not being informed of the company's decision to surrender its registration as an upper layer core investment company to RBI. As an 18.37% minority shareholder in Tata Sons, SP Group had reportedly raised its worries about being excluded from discussions on such a strategically important decision.
