State Health Minister Rajesh Tope said a four-member expert committee’s suggestion to implement caps on the price of masks to curb “profiteering” will be implemented by Thursday.
The expert panel, headed by state health insurance CEO Dr Sudhakar Shinde, was formed on July 31 to study manufacturing cost and advice ceiling prices for masks. It had inspected two major mask manufacturers — Venus Health and Safety Pvt Ltd and Magnum Health and Safety Pvt Ltd — and studied their books along with the Public Health department, GST officials and Central Excise department.
In its 28-page report submitted to Tope on Tuesday, the panel highlighted violations in sale and manufacture of face masks during the ongoing Covid-19 pandemic under Essential Commodities Act, 1955, Legal Metrology Act, 2009, and Prevention of Black Marketing and the Maintenance of Supplies of Essential Commodities Act, 1980.
“We wanted the prices to be fixed based on manufacturing cost. The committee has calculated a net profit of 45 per cent over production cost to provide adequate profit in the supply chain to supplier, distributor and retailer. The new prices will be implemented after the Chief Minister’s signature tonight,” Tope said. He added hospitals can buy masks at a 30 per cent lower rate than the market price. “Patients will be the final beneficiaries of this historic decision,” he said.
In its report, the panel has advised the state government to cap rates of N-95 masks between Rs 19 and Rs 45, depending on the categories, to bring down their rates to one-tenth the current market price. Cost for two-ply masks, it said, should be capped at Rs 3 and three-ply mask at Rs 4. A doctor’s kit, the panel’s report said, should be capped at Rs 127 and a filtering facepiece (FFP) mask at Rs 12. Currently, the rate of a three-ply melt-blown mask is anywhere between Rs 20 and Rs 40 in the market, and an FFP mask around Rs 200-600.
In March, the Centre notified an order under the Essential Commodities Act, 1955, to declare two-ply and three-ply surgical masks, N95 masks and hand sanitisers as essential commodities till June 30. The expert committee found that Magnum had increased the cost of N-95 v-shaped masks by 335 per cent, from Rs 40 to Rs 175 during this period. It increased the cost of a three-ply mask by 60 per cent from Rs 6 to Rs 10.
Venus, it said, had increased the cost of N-95 cup-shaped mask from Rs 43.5 to Rs 150 in March and then to Rs 172 in May, a rise by 295 per cent. While it made no change in its rates in March for an un-valved and valved cup-sized mask, it did hike their prices in May by 80-300 per cent. For instance, the cost of a valved mask was increased from Rs 60.8 before pandemic to Rs 250 in May.
“It appears that the only motive behind such price differential is earning windfall profit by way of cartels,” the report stated.
The provisional gross profit margin for Venus rose to 65 per cent this year from 57.9 per cent in 2019-20 and Magnum’s from 79 to 94.9 per cent in the same period, the report noted. It also observed that the sale of N-95 mask, which comprised 10 per cent of total sales before the pandemic, now occupied 60 per cent of total sales in the two companies.
“The actual cost of manufacturing a mask is very low. This pandemic has been used as an opportunity by the manufacturers to increase rate based on market demand. If demand is high, manufacturers increased the cost,” an FDA official, also member of the state committee, said requesting anonymity.
Mahesh Kudav, managing director of Venus, said the manufacturing cost calculated by the state committee does not factor the present average material cost. “In the last two-three years, the demand was low and the cost of raw material was low too. Now the cost has increased because the raw material is in high demand. We have taken a risk and invested in our capacity building to cater to demand for the next several months. The projection cost has not been factored in by the report,” Kudav said.
He added the government provided no support in investment or to scale-up mask manufacturing units. “We bought machinery here and installed it to increase the production capacity. The cost of expansion has increased production cost,” he added. Magnum director Rakesh Bhagat requested for more time to respond about the contents of the report.