Pharma firms worried about some provisions in production-linked incentive scheme2 min read . Updated: 27 Aug 2020, 06:06 PM IST
- A company, partnership firm, proprietorship firm or a LLP registered in India and possessing a minimum net worth, including group companies, of 30% of proposed investment is eligible to apply for incentives under the scheme
NEW DELHI: The Indian pharmaceutical industry has raised concerns over some provisions in the government’s production-linked incentive (PLI) scheme for drugs which is aimed at reducing dependence on Chinese supplies.
Any company, partnership firm, proprietorship firm or a LLP registered in India and possessing a minimum net worth, including group companies, of 30% of proposed investment is eligible to apply for incentives under the scheme. The scheme only allows greenfield projects.
The scheme aims to promote domestic manufacturing of identified critical key starting materials (KSMs), drug intermediates (DIs), and active pharmaceutical ingredients (APIs) in India.
Financial incentives will be given to a maximum of 136 manufacturers selected under the scheme as a fixed percentage of their domestic sales of 41 products manufactured locally with required level of domestic value addition.
"There are certain challenges and issues that the pharma industry is facing with the scheme such as the applicant should have 30% of net worth and not allowance of brownfield category in the scheme. The scheme should also allow existing manufacturers to manufacture these products with some incentive," said BR Sikri, chairman, ABS Mercantile, at a virtual event organised by the PHD Chamber of Commerce & Industry.
Industry representatives are scheduled to give a presentation to the department of pharmaceuticals and Central Drugs Standard Control Organisation (CDSCO).
“There is 65% of sale price marking in the scheme. The threshold investment should not be treated as double and this needs to get reconsideration. Maximum incentive per eligible product and per selected applicant, need justification on investment versus return," he said.
The department of pharmaceuticals and CDSCO have said they can consider changes in the scheme after a discussion with the industry.
"For PLI scheme for the bulk drugs around ₹7,160 crore have been sanctioned. Government does not want players who are not interested and still make the application without any financial back up, which is the reason to set up the minimum investment threshold else the scheme will fail," Dr S Eswara Reddy, Joint Drug Controller, CDSCO said.
Reddy said authorities have also made presentations to the Department of Expenditure who did not agree on the issue.
"Even the existing manufacturer in their current facility can be eligible for the production of these compounds by adding some additional facilities and some additional modification," said Reddy.
“Department of Pharmaceutical initiated the steps to increase the customs duty on some identified molecules and I am sure that the government will take necessary action to protect our industry. We need to sit with the industry and work something out. We need to see all 41 molecules one by one for any errors," Reddy added.
The scheme is not applicable to APIs manufactured from the certain eligible KSM products. The industry has urged the government to remove this provision.
The domestic pharmaceutical industry is the world’s third largest by volume and 13th largest in terms of value. The industry generates over $11 billion in trade surplus every year and is among the top five sectors contributing to the reduction of India’s trade deficit.
India also contributes approximately 57% of APIs to prequalified list of the World Health Organization (WHO).
However, over the past two decades, India’s reliance on import of low-cost intermediates and APIs has grown. The country imported around ₹249 billion worth of bulk drugs in 2019 compared with ₹193 billion worth of purchases in 2018. Imports from China have been on a steady rise over the years--from 62% in 2012 to 68% in 2019--as India imported ₹169 billion worth of intermediates and APIs from China.