Explained: Why Centre has opened opium production to private players

India has opened up the highly regulated sector of producing and processing opium to private players. The central government has, for the first time, awarded tenders to Thane-based Bajaj Healthcare to produce concentrated poppy straw that is used to derive alkaloids that are the active pharmaceutical ingredient in pain-killers, cough syrups, and even cancer drugs. Around 20-25 players participated in the government’s expression of interest (EoI) for the opium processing work.

According to the Central Bureau of Narcotics (CBN), India is one of the few countries that legally cultivate opium poppy and is the only country on earth that licitly produces opium gum. Two government factories in Ghazipur (Uttar Pradesh) and Neemuch (Madhya Pradesh), have been doing the work so far, processing some 800 tonnes of opium gum annually to extract alkaloids.

What’s the nature of the contract with Bajaj Healthcare?

On July 17, the Centre gave Bajaj Healthcare an initial contract to process 500 tonnes of opium gum annually and wants production to be at 800 tonnes per annum (tpa) in the next five years, indicating the state’s exit from the highly-regulated sector. “We have been awarded two tenders for the supply of opium-derived Alkaloids & APIs to the GoI [government of India], under-long term contracts and expect successive orders under similar tenders, to scale up to processing of around 6,000 tonnes of poppy straw and opium gum in the next five years,” the company said in a statement.

Bajaj Healthcare has modified a part of its plant in Gujarat’s Savli to process opium gum. According to Anil C Jain, joint managing director of Bajaj Healthcare, the plant can process 250 tpa and the company plans to expand capacity.

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What was the need for private players?

Industry sources said the government brought the private sector in to opioid processing as the two state-owned plants are unable to meet demand. Industry sources said the Centre had also tried to engage the private sector, primarily pharma players, to enter poppy farming around 2011-12. However, it evoked little response.

The government plants extract morphine, codeine, thebaine, and other alkaloids from opium and sell them to the pharmaceutical industry. Bajaj Healthcare is primarily an API and intermediates player, drawing around 90 per cent of its Rs 680 crore revenues from APIs and intermediates, while the balance comes from finished doses. Jain said his company will tap opportunities in the alkaloids space in India and abroad.

Since when has opium been grown in India?

As per historical records, India has been growing poppy at least since the 15th century. The British East India Company assumed monopoly on the cultivation of poppy when the Mughal Empire was on the decline, and the entire trade was brought under government control by 1873.

After India gained independence, the cultivation and trade of opium passed on to the Indian government, with the activity being controlled by The Opium Act, 1857, The Opium Act, 1878, and The Dangerous Drugs Act, 1930. At present, the cultivation and processing of poppy and opium is controlled by the provisions of The Narcotic Drugs and Psychotropic Substances (NDPS) Act and Rules.

Why is opium production highly regulated?

Due to the potential for illicit trade and risk of addiction, the cultivation of opium poppy is strictly regulated in the country, with the crops being allowed to be sown only in tracts of land notified by the central government in 22 districts in the states of Madhya Pradesh, Uttar Pradesh, and Rajasthan.

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“The CBN, Gwalior, licenses farmers to cultivate opium poppy; supervises and controls the cultivation; and procures the opium produced by the licenced cultivators,” says the revenue department on its website. The opium CBN collects is transferred to the government opium factories. Part of the opium is dried and exported and some is used to extract alkaloids.
The control mechanisms employed by the government prevents pilferage. The government announces the licensing policy for opium cultivation every year, providing details on minimum qualifying yield, the maximum area that can be cultivated by a single cultivator, and the maximum benefit that is allowed to cultivators for damage to the crop due to natural causes.

What is opium used for?

Opium is a natural substance obtained from poppy seeds and its derivatives are mainly used for pain management. The opium product codeine is helpful in cough suppression.
It is used illicitly for smoking, drinking, or even eating as pills. The addictive properties of opium is the reason that the cultivation of poppy is highly regulated around the world. Only 12 countries, including India, allow its cultivation legally for medicinal use.

How does the involvement of private players help?

The private company will process 6,000 MT of unopened poppy capsules and opium gum to produce active pharmaceutical ingredients over the next five years. The involvement of the private sector might boost the domestic production of various alkaloids such as morphine and codeine, bring in modern technology, and reduce imports. Despite being one of the few global cultivators of poppy, India still imports these active pharmaceutical ingredients as well as poppy seeds, which is also consumed as a food item in the country.

The move is also aimed at offsetting the declining area under cultivation of poppy in India. In 2017 and 2019, under a trial phase, two private companies were allowed to produce concentrated poppy straw.