PLI Scheme for Manufacturing Bulk Drugs in India

The Production Linked Incentive (PLI) Scheme for Bulk Drugs is a government initiative in India aimed at boosting domestic manufacturing of active pharmaceutical ingredients (APIs) and key starting materials (KSMs), which are essential components of pharmaceutical formulations. The scheme was launched by the Ministry of Chemicals and Fertilizers in March 2020 to reduce India's dependency on imports for critical drugs and strengthen the country's pharmaceutical industry. Under the PLI Scheme for Bulk Drugs, eligible manufacturers are provided with financial incentives based on their incremental sales of identified bulk drugs over a period of six years.

Some Key Features of the Scheme are:

• The budget allocated for the PLI Scheme for Bulk Drugs in India has been set at INR 6,940 crores.
• Eligible manufacturers of 41 identified products, which include 53 APIs, will receive financial incentives based on their committed investments and sales over a period of six years.
• The scheme is implemented by the Department of Pharmaceuticals (DoP) and is closely monitored to ensure compliance with the prescribed timelines and targets.

Calculation of Incentives

The scheme offers financial incentives based on the sales of 41 specified products over a duration of six years. The rates for these incentives are provided as follows-

• The incentive rates for fermentation-based products under the scheme are: for FY 2023-24 to FY 2026-27 is 20%; for the year 2027-28 is 15%; and for the year 2028-29 is 5%.
• The incentive rate for chemical synthesis-based products under the scheme is set at 10% for the period from FY 2022-23 to FY 2027-28.

Eligibility

• The manufacturer should be engaged in the manufacturing of the identified products specified under the scheme, such as bulk drugs, key intermediates, or other eligible categories.
• The project should be a newly established project, meeting the criteria of a greenfield project as defined in these guidelines.
• The applicant must not have a history of bankruptcy, being declared as a wilful defaulter, defaulter, or reported for fraud by any bank, financial institution, or non-banking financial company.
• The applicant, including its group companies, must have a net worth equal to or greater than 30% of the total committed investment as of the application date. Applicants who do not meet this net worth requirement will not be eligible for participation.
• The applicant is required to achieve a minimum Domestic Value Addition (DVA) of 90% for fermentation-based products and at least 70% for chemical synthesis-based products, as per the proposal.
• The manufacturer must comply with applicable quality standards, including Good Manufacturing Practices (GMP), as well as any regulatory requirements related to the production and sale of the products.

Overall Challenges Involved

Recipients of incentives under the PLI scheme for manufacturing bulk drugs in India may face some challenges in meeting the eligibility criteria and achieving the incremental sales targets. Some of these challenges include-

• The scheme sets specific eligibility criteria, such as sales thresholds, investment commitments, and compliance with quality standards. Meeting these can be challenging for some companies, especially those that are new or have limited resources.
• Complying with various regulatory requirements related to quality assurance, safety standards, environmental regulations, and intellectual property rights can pose challenges. Companies must ensure adherence to all applicable regulations and maintain necessary certifications.
• Establishing or upgrading manufacturing infrastructure to meet the required standards and scale of production can be a significant challenge. This includes investing in facilities, equipment, and processes to ensure efficient and compliant production.
• Continuous technological upgradation and capacity building are crucial to remain competitive in the long run. Companies need to invest in research and development, technology upgradation, and skill development to stay at the forefront of the industry.
• Maintaining cost competitiveness in a highly competitive market is vital. Companies need to optimize production costs, supply chain management, and operational efficiency to stay competitive, especially considering the price-sensitive nature of the pharmaceutical industry.

The PLI scheme provides a supportive environment for recipients to enhance their competitiveness, contribute to the growth of the domestic pharmaceutical industry, and drive innovation. It encourages research and development, promotes technological upgradation, and fosters collaboration between industry and academia. The PLI scheme serves as a catalyst for the growth and development of the Indian pharmaceutical industry, paving the way for a stronger and more self-sufficient healthcare ecosystem.


To learn more about how to pitch for the PLI scheme, the process of application, disbursement of incentives, the key obligations of the recipient- CLICK HERE.