For the first time, Centre allows a private player to process opium
Bajaj Healthcare is the first private player to be awarded a tender to make alkaloids and APIs from opium gum
For the first time, the Centre allowed a private player – Bajaj Healthcare – to process opium to extract alkaloids used to make common medicines like painkillers, cough syrups, and even cancer drugs. So far, two government factories in Uttar Pradesh and Madhya Pradesh were processing around 800 tonnes per annum (TPA) of opium gum to extract alkaloids.
What’s more, while the initial tender is for processing 500 tonnes of opium gum per year awarded to Thane-based Bajaj Healthcare, the Centre wants to grow that to 800 TPA over the next five years, indicating a slow exit from the basic opium processing.
“We have been awarded two tenders for the supply of opium-derived alkaloids and APIs to the government of India (GoI) under long-term contracts and expect successive orders under similar tenders to scale up to the processing of around 6,000 tonnes of poppy straw and opium gum in the next five years,” the company noted.
Speaking to Business Standard, Anil C Jain, joint managing director of Bajaj Healthcare, the first private company in India to be awarded the tender for processing opium, a highly regulated sector, explained that the government can continue to process alkaloids and develop newer and more complex compounds.
“The processing of the opium gum from the poppy seeds has been outsourced to us. We will extract the alkaloid from it and give it back to the government, which can then sell it to user industries which are basically pharmaceutical players,” Jain said.
Bajaj Healthcare has modified one block in its Savli plant spread over 34 acres, where it will start with processing 100 TPA of opium gum. The manufacturing line can process 250 TPA, and Jain said the company plans to upgrade the line to expand capacity over the years.
After the government requested an expression of interest (EoI), around 20-25 players participated. The margins in this business are high, Jain says. An active pharmaceutical ingredient maker typically makes an Ebitda margin of 18-35 per cent. In opium processing, the margins are better than that, Jain says. Since the government supplies the opium gum, the processor has no input cost.
Industry sources indicated that India is now trying to involve the private sector in opioid processing as the two government plants cannot meet the growing demand. “The government had also tried to engage the private sector, primarily pharma players, to enter poppy farming around 2011-12.
This did not, however, see much response,” said the industry source.
India is one of the few countries legally cultivating opium poppy and is the only country on earth licitly producing opium gum.
“The Central Bureau of Narcotics (CBN), Gwalior, licenses farmers to cultivate opium poppy; supervises and controls the cultivation; and procures the opium produced by the licenced cultivators,” the department of revenue, Ministry of Finance website said. The opium collected by CBN is transferred to the government opium factories at Ghazipur (Uttar Pradesh) and Neemuch (Madhya Pradesh). Part of the opium is dried and exported, while some part of the opium is used to extract alkaloids in the Government Opium and Alkaloid Works. The alkaloids extracted are used in the manufacture of pharmaceuticals.
The Alkaloid Plants extract morphine, codeine, thebaine and other alkaloids from opium and sell them to the pharmaceutical industry.
Jain explains that from processing 800 tonnes of opium gum, around 60-90 tonnes of alkaloid APIs can be extracted. The Chief Controller of Factories also imports alkaloids such as codeine to meet the gap between our production and demand.
Bajaj Healthcare is primarily an API and intermediates player, drawing around 90 per cent of its Rs 680 crore revenue from APIs and intermediates, while the balance comes from finished doses. Jain says they will now try to tap the opportunities in the alkaloids space in India and beyond.
Some pharma companies like Sun Pharmaceutical Industries are into opium processing, but for overseas geographies like Australia and Hungary. It also grows poppies in Tasmania. In 2021 the company cut area under poppy production in Tasmania as global demand for opiate-based pain-management drugs dipped sharply as the Covid19 pandemic had led people to defer elective surgeries.