Cabinet approves Production Linked Incentive Scheme for Pharmaceuticals
26 Feb 2021
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The union cabinet has approved a scheme of Production Linked Incentive (PLI) for pharmaceuticals for a period covering financial years 2020-21 to 2028-29.
The scheme will benefit domestic manufacturers, help create employment and is expected to contribute to the availability of wider range of affordable medicines for consumers.
The scheme is expected to promote the production of high value products in the country and increase value addition in exports. The scheme is expected to help increase sales by Rs2,94,000 crore and total exports by Rs1,96,000 crore during the six years from 2022-23 to 2027-28.
The scheme is expected to generate employment for both skilled and un-skilled personnel, creating an estimated 20,000 direct and 80,000 indirect jobs in the sector.
It is expected to promote innovation for development of complex and high-tech products, including products of emerging therapies and in-vitro diagnostic devices as also self-reliance in important drugs. It is also expected to improve accessibility and affordability of medical products, including orphan drugs to the Indian population. The scheme is also expected to attract investment of Rs15,000 crore in the pharmaceutical sector.
The scheme will be part of the umbrella scheme for the development of pharmaceutical industry. The objective of the scheme is to enhance India's manufacturing capabilities by increasing investment and production in the sector and contributing to product diversification to high value goods in the pharmaceutical sector. One of the further objectives of the scheme is to create global champions out of India who have the potential to grow in size and scale using cutting edge technology and thereby penetrate the global value chain.
The scheme is targeted at manufacturers of pharmaceutical goods registered in India. They will be grouped based on their global manufacturing revenue (GMR) to ensure wider applicability of the scheme across the pharmaceutical industry and at the same time meet the objectives of the scheme. The qualifying criteria for the three groups of applicants will be as follows:
Group A: Applicants having global manufacturing revenue (FY 2019-20) of pharmaceutical goods more than or equal to Rs5,000 crore.
Group B: Applicants having global manufacturing revenue (FY 2019-20) of pharmaceutical goods between Rs500 crore and Rs5,000 crore.
Group C: Applicants having global manufacturing revenue (FY 2019-20) of pharmaceutical goods less than Rs500 crore. A sub-group for MSME industry will be made within this group, given their specific challenges and circumstances.
The total quantum of incentive (inclusive of administrative expenditure) under the scheme is about Rs15,000 crore. The incentive allocation among the target groups is as follows:
(a) Group A: Rs11,000 crore.
(b) Group B: Rs 2,250 crore.
(c) Group C: Rs 1,750 crore.
The incentive allocation for Group A and Group C applicants shall not be moved to any-other category. However, incentive allocated to Group B applicants, if left underutilised can be moved to Group A applicants.
Financial Year 2019-20 shall be treated as the base year for computation of incremental sales of manufactured goods.
The scheme shall cover pharmaceutical goods under three categories as mentioned below:
Biopharmaceuticals; Complex generic drugs; Patented drugs or drugs nearing patent expiry; Cell based or gene therapy drugs; Orphan drugs; Special emptycapsules like HPMC, Pullulan, enteric etc; Complex excipients; Phyto-pharmaceuticals: Otherdrugs as approved.
Active Pharmaceutical Ingredients / Key Starting Materials / Drug Intermediates.
Repurposed drugs; Auto immune drugs, anti-cancer drugs, anti-diabetic drugs, anti-infective drugs, cardiovascular drugs, psychotropic drugs and anti-retroviral drugs; In vitro diagnostic devices; Other drugs as approved; Other drugs not manufactured in India.
Rate of incentive will be 10 per cent (of incremental sales value) for Category 1 and Category 2 products for first four years, 8 per cent for the fifth year and 6 per cent for the sixth year of production under the scheme.
Rate of incentive will be 5 per cent (of incremental sales value) for Category 3 products for first four years, 4 per cent for the fifth year and 3 per cent for the sixth year of production under the scheme.
The duration of the scheme will be from FY 2020-21 to FY 2028-29. This will include the period for processing of applications (FY 2020-21), optional gestation period of one year (FY 2021-22), incentive for 6 years and FY 2028-29 for disbursal of incentive for sales of FY 2027-28.
Indian pharmaceutical industry is the third largest in the world by volume and is worth $40 billion in terms of value. The country contributes 3.5 per cent of the total drugs and medicines exported globally. India has a complete ecosystem for the development and manufactue of pharmaceuticals with companies having state of the art facilities and highly skilled/technical manpower. The country also has a number of renowned pharmaceutical educational and research institutes and a robust support of allied industries.
At present, low value generic drugs has a larger share of India’s pharmaceutical exports, while a large proportion of the domestic demand for patented drugs is met through imports. The PLI Scheme is expected to incentivise investment and production in diversified pharmaceutical product categories.
