Govt launches schemes for local production of bulk drugs, medical devices
29 July 2020
The union government on Monday announced guidelines for setting up bulk drugs parks and medical devices parks in the country, opening the door for production of critical API and manufacture of high-end medical devices in the country.
Minister of chemicals and fertilisers Sadananda Gowda also launched four schemes of the Department of Pharmaceuticals for promotion of domestic manufacture of bulk drugs and medical devices parks in the country.
Gowda said it was also in line with the vision of Prime Minister Narendra Modi, and his clarion call for making India Atmanirbhar in pharma sector. For this the Government of India has approved four schemes, two each for bulk drugs and medical devices. He exhorted the industry and the states to come forward and participate in these schemes.
He said, India is often referred to as ‘the pharmacy of the world’ and this has been proved true especially in the ongoing Covid-19 pandemic when India continued to export critical life saving medicines to needy countries even during the countrywide lockdown. However, despite these achievements, it is a matter of concern that our country is critically dependent on imports for basic raw materials, viz, bulk drugs, which are the key starting materials (KSMs)/drug intermediates (DIs) and active pharmaceutical ingredients (APIs)) that are used to produce some of the essential medicines.
Similarly in medical devices sector, our country is dependent on imports for 86 per cent of its requirements of medical devices, he said.
Speaking at the launch function, minister of state for chemicals and fertilizers Mandavia said this is a very important initiative towards further developing Indian pharmaceutical capacities.
Giving details of the guidelines he said the production linked incentive (PLI) schemes for promoting domestic manufacturing of KSMs, DIs and APIs and medical devices will go a long way in boosting domestic manufacturing of 53 bulk drugs, on which India is critically dependent on imports.
The list of 41 products contained in the scheme guidelines will enable domestic production of 53 bulk drugs. Financial incentives will be given to a maximum of 136 manufacturers selected under the scheme as a fixed percentage of their domestic sales of these 41 products manufactured locally with required level of domestic value addition.
The incentives would be subject to annual ceilings communicated in the approval letter. The incentives would be given for a period of 6 years. In case of fermentation based products, the rate of incentive is 20 per cent for first four years, 15 per cent for the fifth year and 5 per cent for the sixth year.
In case of chemically synthesised products, rate of incentive is 10 per cent for all six years. The selected manufacturers will have to complete committed investment above a threshold investment mandated for each product and achieve a prescribed minimum installed capacity before they are eligible to receive incentives. Threshold investment is Rs400 crore for four fermentation based products and Rs50 crore for ten fermentation based products.
Similarly, threshold investment is Rs50 crore for four chemically synthesised products, and Rs20 crore for 23 chemically synthesised products. Minimum installed capacity to be achieved for each of the 41 products is prescribed in the guidelines. The incentives for fermentation based products would be available from FY 2023-24, ie, after a two year gestation period during which the selected applicant has to complete the committed investment and install the committed capacity.
For chemically synthesised products the incentives would be available from FY 2022-23, ie, after a gestation period of one year during which the selected applicant has to make the committed investment and install the committed capacity. Any company, partnership firm, proprietorship firm or a LLP registered in India and possessing a minimum net worth (including group companies) of 30 percent of proposed investment is eligible to apply for incentives under the scheme.
An applicant can apply for any number of products.
The applicants will be selected on the basis of a transparent composite evaluation criteria, which include the annual production capacity committed by the applicant and the sale price of the product quoted by the applicant. Applicants quoting low sale price and higher production capacity will get higher marks in the evaluation.
The guidelines are available on the website of the Department of Pharmaceuticals. The salient features of the four schemes are:
The scheme is open to applications for a period of120 days from the date of issuance of guidelines and the approval will be given to selected applicants within 90 days from the closure of application window. Applications will be received only through an online portal. The total financial outlay of the scheme is Rs6,940 crore.
Scheme for promotion of bulk drug parks: The scheme envisages creation of 3 bulk drug parks in the country. The grant-in-aid will be 90 per cent of the project cost in case of North East and hilly states and 70 per cent in case of other states. Maximum grant-in-aid for one bulk drug park is limited to Rs1,000 crore.
States will be selected through a challenge method. States interested in setting up such parks will have to ensure assured 24*7 supply of electricity and water to the bulk drug units located in the park and offer competitive land lease rates to bulk drug units in the park. The location of proposed park from environmental angle and logistics angle would be taken into account while selecting the states.
The ease of doing business ranking of the state, incentive policies of the state applicable to bulk drug industry, availability of technical manpower in the state, availability of pharmaceutical/chemical clusters in the state will also be factored in while selecting the states. Interested states will be scored and ranked on an evaluation criteria given in the guidelines. States getting top 3 ranks will be selected. States have to submit their proposal within 60 days of the date of issuance of the guidelines. Selection will be done and in-principle approval will be given to three selected states within 30 days of last date of submission of proposals.
Thereafter, the 3 selected states will have to submit a detailed project report (DPR) within 180 days of the in-principle approval based on which final approval will be given. The grant-in–aid will be released in four installments. First three installments will be 30 per cent each and the last will be 10 per cent of the grant-in-aid. Selected states will have to complete the parks as per the approved DPR within two years of date of release of first installment of grant-in-aid. It is envisaged to have a single window system in these parks for all regulatory approvals under one roof. The creation of a centre of excellence is also envisaged to enable an ecosystem for research and development. The total financial outlay of the scheme is Rs3,000 crore.
Production Linked Incentive (PLI) scheme for promoting domestic manufacture of Medical Devices: The scheme intends to boost domestic manufacture of medical devices in four target segments by giving financial incentives on sales to a maximum number of 28 selected applicants for a period of 5 years.
Financial incentive will be given at a rate of 5 per cent of the sales of domestically manufactured medical devices. The incentives would be subject to annual ceilings communicated in the approval letter the incentives would be available from FY 2021-22.
Four target segments are:
Cancer care / Radiotherapy medical devices
Radiology and Imaging medical devices (both ionizing & non-ionizing radiation products) and Nuclear Imaging devices
Anesthetics and cardio-respiratory medical devices, including catheters of cardio respiratory category and renal care medical devices
AII Implants, including implantable electronic devices
Any company registered in India and possessing a minimum net worth (including group companies) of Rs18 crore (30 per cent of threshold investment of first year) is eligible to apply for incentives under the scheme. The applicant can apply for multiple products within one target segment as well as multiple target segments. Selected applicants will have to complete a threshold investment prescribed for each year and achieve a minimum prescribed sale for that year for them to be eligible to receive incentives.
The application window is 120 days from the date of issuance of guidelines and the approval thereafter to the selected applicants will be accorded within 60 days from the date of closure of application window. Applications will be received only through an online portal. The total financial outlay of the scheme is Rs3,420 crore.
India produces huge number of generic medicines as well as more than 500 APIs, still it has to import large quantities of API, CEO of Niti Ayog Amitabh Kant said.
Secretary pharmaceuticals P D Vaghela gave a detailed presentation of the guidelines.
These schemes along with the liberal FDI policy in these sectors and an effective corporate tax rate of about 17 per cent (including surcharge and cess) will give a competitive edge to India in the selected products vis-à-vis other economies.
Promotion of domestic manufacturing of bulk drugs and medical devices will help the country establish itself as a global hub for medicines, the minister said while launching the schemes.