Cabinet approves Production-Linked Incentive Scheme for Pharmaceuticals

Cabinet approves Production-Linked Incentive Scheme for Pharmaceuticals

New Delhi, February 24, 2021

The Union Cabinet today approved a Production-Linked Incentive (PLI) Scheme for Pharmaceuticals from the financial year 2020-21 to 2028-29.

The scheme will benefit domestic manufacturers, help in creating employment and was expected to contribute to the availability of a wider range of affordable medicines for consumers, an official press release said.

It is expected to promote the production of high-value products in the country and increase the value addition in exports. Total incremental sales of Rs 2,94,000 crore and total incremental exports of Rs 1,96,000 crore were estimated during the six years from 2022-23 to 2027-28.

The scheme is expected to generate employment for both skilled and unskilled personnel, estimated at 20,000 direct and 80,000 indirect jobs as a result of growth in the sector.

It is expected to promote innovation for the development of complex and high-tech products including emerging therapies and in-vitro Diagnostic Devices as also self-reliance in important drugs. It would improve accessibility and affordability of medical products including orphan drugs to the Indian population.

The scheme is also expected to bring in an investment of Rs 15,000 crore in the pharmaceutical sector.

The scheme will be part of the umbrella scheme for the development of the pharmaceutical industry. The objective of the scheme is to enhance India's manufacturing capabilities by increasing investment and production in the sector and contributing to product diversification to high-value goods in the pharmaceutical sector.

The scheme is also aimed at creating global champions out of India with the potential to grow in size and scale using cutting edge technology and thereby penetrate the global value chains, the release said.

The manufacturers of pharmaceutical goods registered in India will be grouped based on their Global Manufacturing Revenue (GMR) to ensure wider applicability of the scheme across the pharmaceutical industry and at the same time meet the objectives of the scheme.

The qualifying criteria for the three groups of applicants will be as follows: Group A: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods more than or equal to Rs 5,000 crore.

Group B: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods between Rs 500 (inclusive) crore and Rs 5,000 crore.

Group C: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods less than Rs 500 crore. A sub-group for the MSME industry will be made within this group, given their specific challenges and circumstances.

The total quantum of incentive (inclusive of administrative expenditure) under the scheme was about Rs 15,000 crore. The incentive allocation among the Target Groups will be Group A: Rs 11,000 crore; Group B: Rs 2,250 crore; Group C: Rs 1,750 crore.

The incentive allocation for Group A and Group C applicants will not be moved to any other category. However, incentive allocated to Group B applicants, if left underutilized, could be moved to Group A applicants.

Financial Year 2019-20 will be treated as the base year for computation of incremental sales of manufactured goods.

The scheme will cover pharmaceutical goods in three categories. Category 1 will have Biopharmaceuticals; Complex generic drugs; Patented drugs or drugs nearing patent expiry; Cell-based or gene therapy drugs; Orphan drugs; Special empty capsules like HPMC, Pullulan, enteric etc.; Complex excipients; Phyto-pharmaceuticals: Other drugs as approved.

Category 2 will comprise Active Pharmaceutical Ingredients/Key Starting Materials/Drug Intermediates.

Category 3 will have drugs not covered under Category 1 and Category 2. These are Repurposed drugs; Autoimmune drugs, anti-cancer drugs, anti-diabetic drugs, anti-infective drugs, cardiovascular drugs, psychotropic drugs and anti-retroviral drugs; In vitro diagnostic devices; Other drugs as approved; Other drugs not manufactured in India.

The rate of incentive will be 10% (of incremental sales value) for Category 1 and Category 2 products for the first four years, 8% for the fifth year and 6% for the sixth year of production under the scheme.

The rate of incentive will be 5% (of incremental sales value) for Category 3 products for the first four years, 4% for the fifth year and 3% for the sixth year of production under the scheme.

The duration of the scheme will be from FY 2020-21 to FY 2028-29. This will include the period for processing of applications (FY 2020-21), the optional gestation period of one year (FY 2021-22), the incentive for 6 years and FY 2028-29 for disbursal of incentive for sales of FY 2027-28.

Indian pharmaceutical industry is the third-largest in the world by volume and is worth $ 40 billion in terms of value. The country contributes 3.5% of the total drugs and medicines exported globally.

India exports pharmaceuticals to more than 200 countries and territories including highly regulated markets such as the USA, UK, European Union, Canada etc. India has a complete ecosystem for the development and manufacturing of pharmaceuticals with companies having state of the art facilities and highly skilled/technical manpower.

The country also has several renowned pharmaceutical education and research institutes and robust support of allied industries.

At present, low-value generic drugs account for the major component of Indian exports, while a large proportion of the domestic demand for patented drugs is met through imports. This is because the Indian Pharmaceutical sector lacks high-value production along with the necessary pharma R&D.

To incentivize the global and domestic players to enhance investment and production in diversified product categories, a well-designed and suitably targeted intervention is required to incentivise specific high-value goods such as bio-pharmaceuticals, complex generic drugs, patented drugs or drugs nearing patent expiry and cell-based or gene therapy products etc.

NNN

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