Govt steps in after LPG diversion triggers near-crisis in pharma supply chain

New Delhi: A government push to divert petrochemical feedstocks for domestic LPG (liquified petroleum gas) supply—in the wake of a cooking gas supply squeeze from the West Asia war—triggered a near-crisis in India’s pharmaceutical sector last month.

The move choked the production of a key solvent—isopropyl alcohol or IPA—used in essential medicines and life-saving drugs, and forced top drugmakers to warn of disruptions to medicine supplies, according to documents reviewed by Mint and three people familiar with the matter.

According to industry stakeholders, the crisis has been averted after the Centre stepped in on 1 April with emergency measures, allowing the reallocation of a ‘certain minimum’ quantum of critical refinery inputs such as propylene and propane to DFPCL and other suppliers for priority sectors including pharmaceuticals, food and distribution and petrochemicals.

The supplies for these sectors would be based on allocations by the Centre for High technology under the petroleum ministry, even as the priority on supply of these molecules for LPG production continues.

Further, according to a communication issued to pharmaceutical associations such as Indian Drugs Manufacturers Association (IDMA) and three industry people familiar with the matter, the Department of Chemicals & Petrochemicals has launched an emergency audit of 11 key chemicals.

The audit would focus on petrochemical and crude oil derivatives used to make essential medicines, including ethanol, acetone, aniline, and para-aminophenol—the essential precursor for manufacturing paracetamol—among others.

Companies have been asked to share current stock levels, indicate how critical each chemical is, and suggest alternative sourcing or substitutes.

”This audit is a mirror held up to a structural vulnerability India has known about but not urgently acted on—the near-complete dependence on petrochemical and natural gas feedstocks that run through concentrated geographies,” said Hari Kiran Chereddi, managing director & CEO of Hyderabad-headquartered HRV Pharma.

He noted that when 11 chemicals (including solvents) sit at the foundation of antibiotics, analgesics, antifungals, and tablet formulations, “any supply disruption isn’t a business problem, it’s a public health event”.

However, early signs suggest the situation has stabilised. A spokesperson for Zydus Lifesciences Ltd said while this was an industry-wide concern in early March, the company is now able to source IPA, and its operations are now on track. “There is no disruption in the production or supplies of formulations or APIs across any of the manufacturing plants,” the spokesperson said in an emailed response to Mint’s queries.

A spokesperson for Hetero Labs Ltd declined to comment.

Queries emailed to the spokespersons of the PMO, petroleum and natural gas ministry, health and family welfare ministry, Drugs Controller General of India, department of petrochemicals, department of pharmaceuticals, Sun Pharmaceutical Industries Ltd, Zydus Lifesciences, Aurobindo Pharma, Glenmark Pharmaceuticals, Indian Oil Corporation, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd, and Reliance Industries Ltd remained unanswered till press time.

Their pleas warned that “not exempting will force (them) to shut down India's essential medicine supply chain”, will “jeopardize the production of life-saving medicines, creating critical and potentially life-threatening shortages for patients”, and that IPA is a “critical raw material for the manufacturing of essential pharmaceutical formulations, including products that support hospitals, emergency care, and public health requirements”.

The crisis was presented by DFPCL on 26 March before a Joint Working Group (JWG) on petrochemicals comprising officials from the Department of Chemicals and Petrochemicals, and the petroleum ministry.

“Seventy-five percent of all the IPA consumed in India goes to the pharmaceutical sector for producing essential medicines in the form of bulk drugs, and formulations,” the company’s representation to the government said, and warned that “failing which the pharmaceutical drug formulators producers will have to stop the production of many of the essential medicines”.

Raghunath Kelkar, president - industrial chemicals, at DFPCL, said the company had demonstrated to the government that it services 75% of domestic pharma’s IPA demand. “We have formally committed to the government that, upon the restoration of our feedstock, 100% of our IPA production will be dedicated exclusively to the pharmaceutical sector to prevent a national scarcity of life-saving medicines and ensure health security,” he said.

Kelkar noted that DFPCL’s plant needs to operate at a minimum 80% capacity to convert propylene into a high-purity solvent that meets strict pharmacopoeia specifications, “a grade that cannot be replicated by bulk imports which suffer from contamination and lack of traceability”.

IPA is a critical pharmacopoeia-grade solvent used in the manufacturing of a wide range of essential medicines. It is indispensable for producing drugs listed under the National List of Essential Medicines (NLEM), including treatments for diabetes, cardiovascular diseases, infections, and pain management, as well as key antibiotics, antivirals and antifungals.

The disruption is significant not just for India’s $50 billion pharmaceutical market—the third-largest globally by volume—but also for global supply chains, given that Indian manufacturers account for about 20% of the world’s generic medicines and 60% of its vaccines.

Industry executives said the feedstock diversion led to shutdowns across upstream chemical plants, with cascading effects on downstream drug manufacturing. Jaijit Bhattacharya, president of the Centre for Digital Economy Policy Research, said the halt in propylene and IPA production could make it impossible to manufacture critical drugs such as those used for diabetes and epilepsy.

The impact has also been felt across the broader chemicals ecosystem. Shivarama Narayanan, chief executive officer of Manali Petrochemical Ltd, said the company was forced to declare force majeure in March after its propylene supplies were cut off, disrupting production of propylene glycol, a key ingredient in cough syrups.

At the same time, rising input costs have compounded the pressure. Vijay Mamania, vice-president at Aarti Industries, said prices of key feedstocks such as benzene and ammonia have surged sharply in recent weeks, adding strain to both pharmaceutical and agricultural supply chains. Aarti Industries manufactures 70% of the domestic supply of para nitro chloro benzene (PNCB), which is used extensively in paracetamol production.