Strait of Hormuz disruption raises costs, supply concerns for medical devices: Rajiv Nath

The ongoing West Asia conflict has escalated into a global security situation, with implications for multiple sectors, including healthcare and pharma. The conflict, which began on February 28, followed maritime incidents and retaliatory strikes, leading to Iran’s blockade of the Strait of Hormuz, having repercussions for the global economy and India.

Addressing the Lok Sabha today, Prime Minister Narendra Modi reiterated that the crisis in West Asia has negatively impacted the global economy and people, noting that the region is also a key route for India’s trade with countries across the world.

Against this backdrop, the medical devices industry has raised concerns over operational and cost pressures arising from the disruption. Rajiv Nath, Forum Coordinator, AiMeD, outlined the sector’s position and ongoing developments.

 

The ongoing Strait of Hormuz blockade and escalating Middle East tensions have driven up medical device input costs by nearly 50 per cent for critical plastics, over 20 per cent for packaging and self generated power running on diesel while nearly doubling Adani PNG gas prices used for power generation and process heating with reduced availability . This is eroding razor-thin margins on essentials like syringes, nitrile gloves, catheters and plastic disposable medical devices in a highly competitive, volume-driven market.

While 1-3 week shipment delays were manageable via buffers, prolonged disruptions risk production halts, hospital shortages, and costs due to inflated prices from market abuse by dominant large raw materials players.

India’s medical devices industry continues to depend on imports for specialised, high-grade polymers that meet stringent quality and regulatory standards.

Current Status: No Shortages, But Rising Pressures

“As of now, there are no shortages of syringes or other medical disposables, contrary to circulating rumors—there is no need to panic. Supplies other than LPG (affecting a few examination glove manufacturers using it as a heat source) have not been disrupted. However, we are seeing substantial price increases, longer lead times, and highly elevated freight costs, which are pressuring cost structures and planning cycles. Many manufacturers have adjusted product pricing by 10-20 per cent to sustain operations. There is no acute shortage in key polymer grades like Polypropylene, HDPE or LDPE, but evolving global supply chain dynamics require close monitoring to prevent impacts on production timelines and industry stability.”Stated Rajiv Nath, Forum Coordinator, AiMeD.

Industry Requests and Urgent Call for Government Action  

Members seek Association support via a circular for rescinding government tender contracts under force majeure. Urgent government action is needed to safeguard over 5 lakh jobs, ensure affordable healthcare access under Atmanirbhar Bharat, and protect exports to the US and EU.

The Government can provide immediate relief by:  

– Ensuring CONCOR reduces its inland freight haulage charges to cover costs without opportunistic hikes.  

– Honoring its assurance to refund excess GST paid within 7 days, alleviating acute working capital distress for medical device manufacturers. 

This is particularly urgent amid the double challenge of the inverted duty structure: manufacturers incur 18 per cent GST on inputs while charging only 5 per cent GST to clients, leading to significant accumulation of unutilised input tax. Currently in most cases refunds are due from time of GST reduction last year leading to huge working capital stress and borrowings .

The Government should not reduce import duties on medical devices based on rumours of shortages . Instead, if wishing to providing support, GoI may offer a temporary 3-month rebate of 2.5 per cent on raw materials imports and 5 per cent on components imports for medical devices under Chapter 90 (other HS codes may be added if feasible).”