The Indian government’s Production Linked Incentive (PLI) scheme for pharmaceuticals aims to promote domestic manufacturing of critical Key Starting Materials (KSMs), Drug Intermediates (DIs), and Active Pharmaceutical Ingredients (APIs). This initiative is designed to reduce India’s reliance on imports and build a robust, self-sufficient pharmaceutical industry. This article will discuss the key features and objectives of the scheme.
Background: Addressing Import Dependency
The Indian pharmaceutical industry, while a global leader, relies heavily on imports for key raw materials, particularly bulk drugs, which account for a substantial portion of the country’s pharmaceutical imports. The PLI scheme was launched to address this issue by incentivizing domestic production of crucial inputs.
Objectives: Self-Reliance and Domestic Manufacturing
The objectives of the PLI scheme are:
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To achieve self-reliance in the production of critical KSMs, DIs, and APIs.
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Reduce dependence on imports of key pharmaceutical materials.
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Provide financial incentives based on committed investment and sales.
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Increase domestic manufacturing capacity and encourage local production.
Key Components: Incentives Based on Performance
The PLI scheme focuses on:
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Providing financial incentives based on committed investment and sales of eligible products.
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Targeting key products across four segments – Fermentation based KSMs/DIs, Niche Fermentation based KSMs/DIs/APIs, Chemical Synthesis based KSMs/DIs, and other Chemical Synthesis based KSMs/DIs/APIs.
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Encouraging both greenfield and brownfield projects for the establishment of eligible units.
Eligibility Criteria: Focusing on Qualified Applicants
Eligible applicants for the scheme are:
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Proprietary firms, partnership firms, Limited Liability Partnerships (LLP) or Companies registered in India proposing to manufacture eligible products.
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Organizations making a committed investment in a greenfield project.
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Entities demonstrating a net worth of at least 30% of the committed investment
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Organizations achieving a minimum of 70% to 90% Domestic Value Addition (DVA), depending on the manufacturing process.
Financial Incentives: Based on Performance
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The scheme provides incentives for a period ranging from FY 2023-24 to FY 2028-29. The duration of incentive varies across different categories of products (fermentation based products or chemically synthesized products).
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The incentive rate for fermentation based products is 20% for the first four years, 15% for the fifth year and 5% for the sixth year. The incentive rate for chemical synthesis based products is 10% for six years.
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Incentives are calculated based on net sales of eligible products and are subject to a pre-determined ceiling amount.
Project Implementation and Monitoring:
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A Project Management Agency (PMA) is appointed to oversee the implementation and verify compliance.
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The Empowered Committee (EC) makes final approval decisions.
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The scheme uses an online portal for submitting applications, tracking progress, and ensuring transparency.
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A Technical Committee (TC) provides expert opinions on technical issues related to the scheme.
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Independent third-party evaluation will also be carried out to assess effectiveness.
Detailed Processes:
The article explains several key steps:
* The process for availing the incentives,
* Eligibility criteria,
* Calculation of incentives,
* The process for applying,
* The evaluation and approval process
* Monitoring and evaluation methods
* Procurement guidelines
Conclusion
The Production Linked Incentive (PLI) scheme for pharmaceuticals is a critical initiative for India to achieve self-reliance and reduce import dependence in key areas of the pharmaceutical sector. By providing incentives linked to performance, the scheme encourages domestic manufacturing, fosters innovation and improves the quality and availability of essential drugs and raw materials.