Health Canada’s Plan To Combat Cannabis Shortage Could Backfire, Industry Experts Say


In November last year, cannabis industry insiders warned that Canada could face sharp shortages of the substance for years. During the first month of legalization, seven provinces reported severe shortages of cannabis. To salvage the situation, Health Canada announced last week that it had updated the cannabis cultivation licensing process.

Health Canada is after clearing the backlog

For starters, the authorities initially gave licenses to any entity which had enough capital to build a fully functioning cultivating facility. However, the updated process, effective from May 8 2019, requires that companies cultivation sites that are fully constructed to acquire the license. In particular, the facility must meet the Cannabis Regulations threshold and any other requirements applicable during the application process.

According to Health Canada, the fresh requirements will reduce the backlog of companies waiting for cultivation licenses. A spokesperson of the licensing authority said that, as at March 31, there were 614 applicants waiting for such licenses. In light of this, Health Canada said that all the applicants will need to construct the facilities before a review of the applications is done. Notably, the applications will be reviewed on priority basis depending on the date of application.

The new licensing process could be problematic

Unlike previously where applicants only needed to lodge their request through the Cannabis Tracking and Licensing System (CTLS) and await confirmation, they now have to provide full information about the cultivation site. Health Canada will review the site information and will then require a video or picture evidence of an operational facility before granting the license. The authority further said that cultivators can then apply for an amendment to their licenses so that they can expand their cultivation capacity.

On the contrary, industry insiders note that the new move by Health Canada could jeopardize the industry further. According to a cannabis lawyer who spoke to Bloomberg in a phone interview, the new licensing process will not solve the backlog problem. As per the lawyer, the new rules will lead to many cultivators applying for amendments to their licenses at the same time and that will lead to another backlog.

Health Canada believes the problem is that of supply chain and not supply

Further, the requirement implies that prospective cultivators will require larger amounts of capital to launch their business. As such, small scale producers will face expansion problems due to capital problems. This means that only large and established producers will be able to continue supplying the substance.

Even as industry insiders claim there is a cannabis supply problem, Health Canada maintains that the problem is the supply chain. This simply means that while there could be enough raw cannabis in the market, the problem lies in converting and packaging of the substance before it reaches the consumer. However, government retailers acknowledged that there is a supply shortage.

As much as the new process will be more challenging to new entrants, some industry insiders believe that if it will ease the backlog and free more cannabis into the market, then Health Canada should go ahead and implement it.

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