Pharma MSMEs ask government to extend incentives of PLI scheme

Due to incremental sales and production provisions of the PLI scheme, the MSME sector is not able to avail the desired benefits

To reduce import dependency and boost domestic manufacturing activities of critical KSMs/Drug Intermediates/APIs, the government has announced the production linked incentive (PLI) scheme worth of Rs 6940 crores. It is expected to benefit up to 136 manufacturers involved in the manufacturing of fermentation technology and chemical synthesis products.

How will it benefit the pharma industry?

The objective of the government is to see the industry benefitting from the scheme in the long run, even after the incentive period is over. And manufacturers who are focussing on investing in the implementation of advanced technology, are likely to lead the race. For instance, if a manufacturer adopts novel technologies like flow chemistry or continuous manufacturing, which are known for safety, low environment and solvent burden; biocatalysts/novel enzymes; substitution of noble metals with cheaper metals; green chemistry/zero discharge or low polluting technologies with in situ or in-process recoveries; then he would get priority consideration. Because, as per the announced scheme, manufacturers’ proposal would be taken into consideration because the implementation of a process or technology can help them get their production commercialised significantly earlier than other processes.

The scheme looks more lucrative to fermentation-based products than chemical synthesis products. The scheme tenure for the chemical synthesis and fermentation technology-based products is seven and eight years respectively. The rate of incentive for fermentation products for the first four years would be 20 per cent and for the fifth and sixth year, it would be at around 15 per cent and five per cent respectively. Whereas, the manufacturers of chemical synthesised products would be getting 10 per cent incentive for the entire scheme period.

For instance, a manufacturer under the category of chemical synthesis wants to manufacture DCDA which is a KSM used in manufacturing metformin, with minimum production capacity 4000 metric tons and an investment of Rs 150 crores, would be getting Rs 10 crore incentives annually. Whereas, a manufacturer involved in producing, Penicillin-G, KSM production capacity of 5000 metric tonnes with an investment of Rs 750 crore will be eligible for Rs 120 crore per annum, which is a 20 per cent for the first four years and for the fifth and sixth year it would be around 15 per cent and five per cent respectively.

Under the PLI scheme, the financial assistance would be given to 23 chemical synthesis based products from four major key starting materials (KSM), which are 2-MNI, (used for manufacture metronidazole imidazole, tinidazole), CDA; (used for manufacture gabapentin), DCDA (used for manufacture metformin) and PAP (used for manufacture paracetamol). And there will be a total of 92 manufacturers, four manufacturers will be selected from each API category and each API category will get Rs 10 crore incentive.

The PLI scheme would not consider the land cost as an investment. To avail the benefits, the manufacturer would need to submit the application within 90 days of the issued advertisement. And all the applications would be screened by the government within 120 days from the date of receipt of application.

Industry speaks

Commenting on the objective of the PLI scheme, SV Veeramani Chairman and Managing Director, Fourrts Laboratories said, “The PLI scheme has been provided with a great objective of ensuring the availability of APIs for India and drug security, without any dependence on imports from China. But the scheme doesn’t touch on the funding support for investment, it is more focused on incentives for incremental sales. Whereas, the production and sales can happen only after proper investment and availability of novel technology implementation.” He further recommended, “There are limits on minimum investment and number of manufacturers in the scheme. And I feel that the scheme could have been more simplified.”

Venkata Reddy, Managing Director, Lee Pharma commented, “The government’s decision to incentivise manufacturing of active pharmaceutical ingredients (APIs) and key starting materials for drugs under Make in India, will work well in the creation of a self-sufficient healthcare ecosystem in the country, and reduce dependence on imports. The new policy is a bold announcement by the government and will give the necessary fillip to the API industry in India. This will safeguard healthcare security and create the ecosystem for a strong Indian API industry. The government policy to encourage the fermentation-based industry will also help build self-reliance as China has gained importance in fermentation-based APIs namely, antibiotics and vitamins.”

He added, “India is the pharmacy of the world and contributes 20 per cent to the global generics market. However, the industry is dependent on China for many APIs and KSMs, which go into the manufacturing of formulations. India has the capability and competence to manufacture all APIs. The announcement by the Government will help revive the API industry in the country and will help the sector regain the dominance that was lost over the years. The investment in creating bulk drug parks is an important step in the right direction for the development of the industry. We require further financial credit support to build new facilities for the promotion of domestic manufacturers in addition to creating bulk drug parks and the Production Linked Incentive Scheme.”

He continued, “The whole pharma world is looking at India to collaborate by making the joint ventures. Hence, this is the appropriate time for the government to further extend the schemes and support the pharma industry.”

Production Linked Incentive Scheme
Aim: The PLI scheme aims to promote domestic manufacturing of critical key starting materials (KSMs)/drug intermediates and active pharmaceutical ingredients (APIs) in the country.
Funding: Under the scheme financial incentive will be given to eligible manufacturers of identified 53 critical bulk drugs on their incremental sales over the base year (2019-20) for a period of six years.
Impact: PLI scheme will reduce India’s import dependence on other countries for critical KSMs/Drug Intermediates and APIs. This will lead to expected incremental sales of Rs.46,400 crores and significant additional employment generation over eight years.
Implementation: The scheme will be implemented through a Project Management Agency (PMA) to be nominated by the Department of Pharmaceuticals.

APIsDepartment of PharmaceuticalsDrug IntermediatesFourrts LaboratoriesKSMsLee Pharmapharma MSMEproduction linked incentive schemeSV VeeramaniVenkata Reddy
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