Medical device makers face cost squeeze as gas curbs and polymer prices surge

India’s medical device manufacturers are facing a sharp cost shock as geopolitical tensions in West Asia disrupt energy supplies and drive-up petrochemical prices, squeezing margins for makers of essential hospital consumables such as syringes, IV sets and catheters.

Industry executives say the twin impact of gas supply curbs and steep increases in plastic raw material prices is eroding already thin margins in a sector dominated by small and medium enterprises.

“The Strait of Hormuz blockade and West Asia tensions have spiked medical device input costs by nearly 50 per cent for plastics and doubled Adani PNG gas prices used for power generation and process heating,” said Rajiv Nath, Forum Coordinator of the Association of Indian Medical Device Industry (AiMeD) and representing Hindustan Syringes and Medical Devices.

“This is eroding thin margins on essentials like syringes and catheters,” he said. The disruption comes at a time when the sector has been expanding its export footprint and scaling domestic production under the government’s Atmanirbhar Bharat push for medical devices manufacturing.

Energy shock hits production lines

Manufacturers say the pressure began building after gas suppliers started notifying industrial customers about supply restrictions linked to disruptions in LNG shipments moving through West Asia.

According to a communication sent by Adani Total Gas to customers earlier this month, gas supplies would be limited to 40 per cent of the daily contracted quantity until further notice.

The notice also sharply revised the price for excess gas. The contracted MGO gas price of about ₹55.60 per SCM has effectively doubled to ₹119.90 per SCM, according to a notice reviewed by Business Today.

Gas is widely used in medical device manufacturing for sterilisation processes, moulding operations and heating systems used in producing disposable healthcare products.

Industry executives say that while companies may be able to manage short-term disruptions through operational adjustments, prolonged curbs could begin to affect manufacturing output.

Plastics get costlier

At the same time, manufacturers are grappling with a rapid escalation in polymer prices the primary raw material used in most medical disposables.

Polypropylene, polyethylene, and PVC are widely used in products such as syringes, IV sets, catheters, and blood bags. Over the past two weeks, these materials have seen repeated price revisions by domestic suppliers.

Industry data shows that polymer prices have been revised several times in March alone. On March 1, polypropylene prices were increased by ₹2 per kg while LLDPE and HDPE rose by ₹2,500 per tonne. Within two days, on March 3, polypropylene prices were raised again by ₹6 per kg while LLDPE and HDPE climbed by ₹6,000 per tonne.

The increases accelerated through the month. On March 6, polypropylene prices were revised upward by ₹15 per kg, and LLDPE and HDPE rose by ₹15,000 per tonne. PVC prices were increased by ₹13,000 per tonne on March 10, followed by another steep hike on March 11 when polypropylene prices rose by ₹23 per kg while LLDPE and HDPE increased by as much as ₹20,000 to ₹24,000 per tonne.

Taken together, industry estimates suggest that plastic input costs have risen by nearly 50 per cent in recent weeks, placing sudden pressure on manufacturers of essential healthcare consumables.

Margins under strain

For many companies in the sector particularly small and medium manufacturers that form the backbone of India’s medical consumables ecosystem the combined surge in energy and raw material costs is beginning to strain operations.

While shipment delays of one to three weeks caused by disruptions in shipping routes remain manageable through inventory buffers, industry representatives warn that prolonged disruptions could affect production.

“While short shipment delays are manageable, prolonged disruptions risk production halts, hospital shortages and inflated prices due to market abuse by dominant raw material suppliers,” Nath said.

India’s medical device sector employs more than five lakh workers, many of them in smaller manufacturing clusters that produce large volumes of hospital disposables for both domestic and export markets.

A policy squeeze

The current cost shock is also highlighting structural pressures facing domestic manufacturers, particularly the sector’s inverted GST structure.

Manufacturers typically pay 18 per cent GST on raw material inputs, but many finished medical consumables such as syringes and catheters attract only 5 per cent GST. The difference leads to a buildup of unutilised input tax credits, tying up working capital for companies.

Industry bodies say the situation becomes especially difficult during periods of input cost volatility, when companies must pay higher taxes on increasingly expensive raw materials.

Manufacturers have been urging the government to implement faster refunds of excess GST credits to ease working capital pressure. “Urgent government action is needed to safeguard over five lakh jobs and protect affordable healthcare access, as well as exports to the US and EU,” Nath said.

Holding the price line

Despite the sudden rise in costs, some manufacturers say they are reluctant to immediately pass on higher prices to hospitals and patients.

“At HMD we are not going to follow our raw material suppliers in opportunistic price gouging by raising prices steeply overnight,” Nath said. “We will wait for price revisions only after earlier low-cost inventory is consumed. We have a responsibility to our needy patients.”

For now, manufacturers are relying on existing inventories and operational adjustments to absorb the shock. But industry executives say that if disruptions in energy supplies and polymer prices persist, companies may eventually be forced to revise prices.