TheUnion Cabinet, chaired by the Prime Minister, Narendra Modi has approvedProduction Linked Incentive (PLI) Scheme for Pharmaceuticals over a period ofFinancial Year 2020-21 to 2028-29.
TheScheme will benefit domestic manufacturers, help in creating employment and isexpected to contribute to the availability of wider range of affordablemedicines for consumers.
Thescheme is expected to promote the production of high value products in thecountry and increase the value addition in exports. Total incrementalsales of Rs.2,94,000 crore and total incremental exports of Rs.1,96,000 croreare estimated during six years from 2022-23 to 2027-28.
Thescheme is expected to generate employment for both skilled and un-skilledpersonnel, estimated at 20,000 direct and 80,000 indirect jobs as a result ofgrowth in the sector.
Itis expected to promote innovation for development of complex and high-techproducts including products of emerging therapies and in-vitro DiagnosticDevices as also self-reliance in important drugs. It is also expected toimprove accessibility and affordability of medical products including orphandrugs to the Indian population. The Scheme is also expected to bring ininvestment of Rs.15,000 crore in the pharmaceutical sector.
Thescheme will be part of the umbrella scheme for the Development ofPharmaceutical Industry. The objective of the scheme is to enhance India'smanufacturing capabilities by increasing investment and production in thesector and contributing to product diversification to high value goods in thepharmaceutical sector. One of the further objectives of the scheme is to createglobal champions out of India who have the potential to grow in size and scaleusing cutting edge technology and thereby penetrate the global value chains.
Thesalient features of the Scheme are as follows:-
Target Groups:
Themanufacturers of pharmaceutical goods registered in India will be grouped basedon their Global Manufacturing Revenue (GMR) to ensure wider applicability ofthe scheme across the pharmaceutical industry and at the same time meettheobjectives of the scheme. The qualifying criteria for the three groups of applicantswill be as follows-
(a) Group A: Applicants havingGlobal Manufacturing Revenue (FY 2019-20) of pharmaceutical goods more than orequal to Rs 5,000 crore.
(b) Group B: Applicants havingGlobal Manufacturing Revenue (FY 2019-20) of pharmaceutical goods between Rs500 (inclusive) crore and Rs 5,000 crore.
(c) Group C: Applicants havingGlobal Manufacturing Revenue (FY 2019-20) of pharmaceutical goods less than Rs500 crore. A sub-group for MSME industry will be made within this group, giventheir specific challenges and circumstances.
Quantum of Incentive:
Thetotal quantum of incentive (inclusive of administrative expenditure) under thescheme is about Rs 15,000 crore. The incentive allocation among the TargetGroups is as follows:
(a) Group A: Rs 11,000 crore.
(b) Group B: Rs 2,250 crore.
(c) Group C: Rs 1,750 crore.
Theincentive allocation for Group A and Group C applicants shall not be moved toany-other category. However, incentive allocated to Group B applicants, if leftunderutilized can be moved to Group A applicants.
FinancialYear 2019-20 shall be treated as the base year for computation of incrementalsales of manufactured goods.
Category of Goods:
Thescheme shall cover pharmaceutical goods under three categories asmentioned below:
a. Category 1
Biopharmaceuticals; Complexgeneric drugs; Patented drugs or drugs nearing patent expiry; Cell based orgene therapy drugs; Orphan drugs; Special emptycapsules like HPMC, Pullulan,enteric etc.; Complex excipients; Phyto-pharmaceuticals: Otherdrugs asapproved.
(b)Category 2
Active PharmaceuticalIngredients / Key Starting Materials / Drug Intermediates.
(c)Category 3 (Drugs not covered underCategory 1 and Category 2)
Repurposeddrugs; Auto immune drugs, anti-cancer drugs, anti-diabetic drugs,anti-infective drugs, cardiovascular drugs, psychotropic drugs andanti-retroviral drugs; In vitro diagnostic devices; Other drugs as approved;Other drugs not manufactured in India.
Rate ofincentive will be 10% (of incremental sales value) for Category 1 and Category2 products for first four years, 8% for the fifth year and 6% for the sixthyear of production under the scheme.
Rate ofincentive will be 5% (of incremental sales value) for Category 3 products forfirst four years, 4% for the fifth year and 3% for the sixth year of productionunder the scheme.
The duration of the scheme will be from FY2020-21 to FY 2028-29. This will include the period for processing ofapplications (FY 2020-21), optional gestation period of one year (FY 2021-22),incentive for 6 years and FY 2028-29 for disbursal of incentive for sales of FY2027-28.
Background:
Indianpharmaceutical industry is 3rd largest in the world by volume and is worth USD40 billion in terms of value. The country contributes 3.5% of total drugs andmedicines exported globally. India exports pharmaceuticals to more than 200countries and territories including highly regulated markets such as USA, UK,European Union, Canada etc. India has a complete ecosystem for the developmentand manufacturing of pharmaceuticals with companies having state of the artfacilities and highly skilled/technical manpower.
The country also has a numberof renowned pharmaceutical educational and research institutes and a robustsupport of allied industries.
Atpresent, low value generic drugs account for the major component of Indianexports, while a large proportion of the domestic demand for patented drugs ismet through imports.
This is because the Indian Pharmaceutical sector lacks inhigh value production along with the necessary pharma R&D. In order toincentivize the global and domestic players to enhance investment andproduction in diversified product categories, a well-designed and suitablytargeted intervention is required to incentivize specific high value goods suchas bio-pharmaceuticals, complex generic drugs, patented drugs or drugs nearingpatent expiry and cell based or gene therapy products etc.