Despite tweaks, bulk drug scheme falls short of closing gap on China

India’s revised production-linked incentive (PLI) scheme for manufacturing bulk drugs may not be enough to help local companies match the massive production capacity of China, said industry executives.

The ₹6,940-crore bulk drug PLI scheme seeks investments to boost domestic capacity, but some industry experts maintained that the investment could prove insufficient and further impetus in the form of additional subsidies may be needed.

“The removal of the minimum investment criterion will surely add further momentum for domestic production and speed up the Indian pharma industry’s journey to become self-reliant. However, we need to balance investments with optimizing the cost of production as a result of scale,” said Ramesh Swaminathan, Lupin’s chief financial officer and head of corporate affairs, adding that he expects companies to decide on taking part in the PLI scheme based on their risk-return appetites.

Priyanka Chigurupati, executive director at bulk drug producer Granules Pharmaceuticals, said under the latest scheme, incentives are provided equally, regardless of scale, which makes it unattractive for companies that set up larger plants for the same product.

“The benefits are currently completely back-ended and what would help manufacturers is government support right from the early stage of production so that the industry can sustain competition for the first few years from competitors who have highly-depreciated facilities and have the ability to cut down prices to keep competition at bay,” Chigurupati added.

Another bulk drug maker, Laurus Labs, plans to apply a few molecules under the scheme, but said that the PLI benefits are unlikely to cover a major part of its business.

“Our approach is to identify two molecules where we already have an API to expand our capacities to meet and qualify for the PLI scheme,” said Satyanarayana Chava, chief executive officer, Laurus Labs.

The other flaw is the requirement that only greenfield facilities are eligible for incentives under the scheme, which defeats the purpose of boosting bulk drug production.

“Some of the bulk drugs on the list can be manufactured at existing facilities by setting up an additional production line instead of a new plant. The government should allow brownfield investments as well,” a pharmaceutical company official said on the condition of anonymity.

That apart, industry officials have also raised other issues such as the availability of cheap capital, land and power. Similar concerns were highlighted in July report of the Technology Information Forecasting and Assessment Council, a think tank under the Department of Science and Technology.