Tired of the endless cannabis shortages which have threatened to hand the legal cannabis industry back to the black market, Health Canada has come up with a new way to increase how soon a newly licensed cultivator can start growing cannabis.
The solution that Health Canada wants to start implementing entails giving production licenses to entities which already have a cultivation facility ready.
This means that companies which want to grow cannabis will have to first construct the greenhouses they intend to use so that the facilities can be ready for inspection by Health Canada. Facilities which pass the inspection can then be licensed to start operation immediately.
This new approach is likely to favor the bigger players at the expense of smaller entities which want to enter the cannabis cultivation space.
For example, Aphria has been waiting for its new Ontario-based cultivation site to be approved by Health Canada for more than a year. If this new rule had been in place from the very start, Aphria would have started cultivation long ago, thereby getting a head-start in the market while other entities without ready grow facilities play catch up.
The key question is, will this change in the regulatory approval process bring the cannabis shortage to an end?
The realistic answer is that the move will have a very small difference in fixing the problems causing marijuana shortages in Canada. For example, one of the reasons for the persistent shortages is that it has been difficult for harvested marijuana to be processed and packaged due to a shortage of packaging materials which meet the strict requirements set by Health Canada.
Many cultivators have cannabis which cannot be released onto the market because it hasn’t been packaged in a way that complies with the Cannabis Act. Speeding up how soon a licensed firm starts growing cannabis will not fix this packaging nightmare.
Another reason why switching to licensing cultivators who already have grow facilities may not solve the supply shortages is the red-tape at Health Canada. Many entities have been waiting for over a year to have their license application considered even without the requirement to have ready cultivation facilities. It is hard to imagine how the processing of applications will miraculously speed up just because Health Canada now says they will give priority to applicants with cultivation facilities already set up.
Phivida Holdings Inc. (CSE: VIDA) (OTCQX: PHVAF) and Net Element Inc. (NASDAQ: NETE) look forward to the time when Health Canada fixes all its internal issues which have played a part in perpetuating the cannabis shortages in the country.
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