Mint explainer: Centre extends deadline for ₹5,000 crore pharma R&D scheme. Here’s why?

Mint explains the rationale behind the extension.

What is the scheme?

While India has earned the moniker of the “pharmacy of the world" for producing affordable generic drugs, it has historically lagged in high-risk, high-reward basic research—particularly in discovering new chemical entities (NCEs) and developing complex novel drugs.

The ₹5,000 crore government initiative is designed to fix this innovation deficit and shift the industry’s focus from a volume-based model to a value-based, innovation-driven one, ultimately positioning the country as the “laboratory of the world".

The Indian pharmaceutical industry currently accounts for about 3.4% of the global pharma market. With the right growth enablers, it could expand its share to 4% (around $130 billion) or even 5% (roughly $160 billion).

How will the scheme address the lack of research and development (R&D)?

Leading Western pharmaceutical companies routinely spend 15% to over 20% of their revenues on R&D for breakthrough therapies such as gene therapy and precision medicine. In contrast, top Indian companies invested only around 7.2% of their sales in R&D in 2020-21.

This scheme tackles this gap through two major components. Firstly, ₹700 crore is earmarked to establish centres of excellence at the National Institute of Pharmaceutical Education and Research (NIPER)'s seven branches to build world-class, shared research infrastructure. The overarching aim is to promote stronger industry-academia linkages for R&D in priority areas, cultivate a culture of quality research, and nurture a pool of scientists for sustained global competitiveness.

Secondly, ₹4,200 crore is allocated for direct financial grants to the industry and startups, derisking projects in strategic areas and encouraging the private sector to commit the significant capital needed to develop globally competitive IP and close the innovation gap with the West.

Why has the Centre extended the deadline for applying for the scheme?

The government extended the deadline primarily to enable wider participation and accommodate additional requests from interested parties. Despite having already received an “encouraging response" from various key stakeholders, including startups, micro, small and medium enterprises, large industry players, and multinational companies, the extension was granted to ensure maximum inclusion.

Furthermore, applicants were advised that key preliminary steps, such as entity locker registration and fee payment on Bharatkosh, require time for processing and verification, necessitating an extension to give all registered entities adequate time to complete their formal applications.

What are the scheme's priority areas for financial support?

The scheme focuses its large grant component on six priority areas, including New medicines (like new chemical entities and biologics), complex generics and biosimilars, and novel medical devices. Critically, the scheme also offers higher financial assistance, up to 50% of the project cost, for strategic priority innovations (SPIs) that address areas of the country's public health concern for which market potential is relatively lower. These SPIs include orphan drugs for rare diseases and medications targeting antimicrobial-resistant priority pathogens.

What's the funding structure?

The funding mechanism is flexible and risk-adjusted. For startups and MSMEs working on early-stage projects, the scheme provides up to ₹5 crore per project. Importantly, for projects costing up to ₹1 crore, no co-funding from the applicant is required, providing crucial risk capital. For larger industry players and startups undertaking more mature, late-stage projects, the scheme offers grants of up to ₹100 crore, typically restricted to a maximum of 35% of the total approved project cost. This co-funding approach ensures that both the government and the industry are invested in the project's ultimate success.