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DoP introduces revised PLI scheme for bulk drugs & medical devices removing minimum investment limit

Laxmi Yadav, Mumbai
Monday, November 2, 2020, 08:00 Hrs  [IST]

In a bid to ensure effective participation of the industry, the Department of Pharmaceuticals has introduced revised Production Linked Incentive (PLI) scheme guidelines for promoting domestic manufacturing of key starting materials (KSMs), drug intermediates (DIs), active pharmaceutical ingredients (APIs) and medical devices, removing minimum investment criteria and incorporating export and sale-based production criteria following an appeal by drug and medical device industries.

As per the revised guidelines of PLI scheme for boosting indigenous production of 41 products which cover all the identified 53 APIs for which India is critically dependent on China, the criteria of 'minimum threshold' investment have been replaced by 'committed investment' by the selected applicant. The change has been made to encourage efficient use of productive capital as the amount of investment required to achieve a particular level of production depends upon choice of technology and it also varies from product to product. The provision for verification of the actual investment made by the selected applicant for the purpose of giving incentives under the scheme continues.

The provision which restricts the sales of eligible products to domestic sales only for the purpose of eligibility of receiving incentives has been deleted, bringing the scheme in line with other PLI schemes and encouraging market diversification.

A change has been made in the minimum annual production capacity for 10 products viz tetracycline, neomycin, para amino phenol (PAP), meropenem, artesunate, losartan, telmisartan, acyclovir, ciprofloxacin and aspirin. Minimum annual production capacity is a part of eligibility criteria under the scheme.

The last date for receiving applications under the scheme is now extended by a week to November 30, 2020.

The guidelines of the scheme were originally issued on July 27, 2020 which has now been superseded by revised guidelines issued by the department on October 29, 2020.

The revised guidelines were approved by NITI Aayog chairman led empowered committee of the scheme following recommendation of technical committee set up under the scheme which received suggestions from the DoP. Industry associations such as IDMA, BDMA, SMPMA etc have made representations to the department seeking removal of threshold investment criteria and inclusion of export and sale based production criteria in the PLI scheme to encourage participation of more manufacturers.

Welcoming the revised guidelines of the PLI scheme, Yogin Majmudar, chairman of Bulk Drug Committee, IDMA said, “The removal of minimum investment criteria is a welcome step. The threshold investment requirement was a constraint for the manufacturers who can make minimum investment to produce identified products considering they already have common surplus utilities available to them.”

As per PLI scheme guidelines dated July 27, 2020, threshold investment was Rs. 400 crore for four fermentation based products and Rs. 50 crore for ten fermentation based products. Similarly, threshold investment was Rs. 50 crore for four chemically synthesised products, and Rs. 20 crore for 23 chemically synthesised products.

Majmudar also hailed inclusion of export criteria in the revised PLI scheme, saying that this will increase the number of the applicants in the scheme.

If there are more than four applicants for 27 chemical synthesised products and more than two applicants for 14 fermentation based products, selection of applicants for the incentive will be done on the basis of marks obtained by them in the evaluation criteria which include committed annual production capacity and quoted sale price etc.

It is learned that so far DoP has received around 125 applications for manufacturing of bulk drugs under the PLI scheme.

The pharmaceutical Industry is still in the wait-and-watch mode on making investment in manufacturing identified bulk drugs as there are chances of a steep decline in prices of Chinese APIs, once Indian manufacturers commence production of these bulk drugs, said an industry expert.

It will take around two years to commence operation of Greenfield projects of identified KSMs, DIs, APIs. China could reduce prices of these products to discourage their local production by then, he said.

In the past, there were instances of Chinese API makers reducing prices of raw materials to sabotage the local manufacturing of bulk drugs. The government had also not come forward to support the manufacturers of fermentation based products grappling with dumping of low priced Chinese products, he added.

With the minimum investment criteria has been done away with, the provision of committed investment mentioning that using ancillary facilities of existing plants will not qualify for committed investment to be made under the scheme is a little bit confusing to manufacturers. The provision should have been removed, said another industry expert.

Hailing the revised PLI scheme guidelines, Nipun Jain, chairman of Small and Medium Pharma Manufacturers Association said replacement of the criteria of threshold investment with committed investment is a great relief. It will encourage MSME manufacturers to participate in the PLI scheme in large numbers. This will make the country self-reliant in the production of APIs in the long run. Currently, India is known as the pharmacy of the world. Besides this, it supplies APIs across the world whenever needed. The revised guidelines will make it a worldwide leader in APIs.”

Similarly, there is replacement of the criteria of 'minimum threshold' investment with 'committed investment' by the selected applicant in the revised PLI scheme guidelines of medical devices.

Besides this, the eligibility criteria of minimum sales threshold has been amended in line with projected demand, technology trend and market development, for the purpose of availing incentive under the scheme.

The tenure of the scheme has been extended by one year considering the capital expense expected to be borne by the selected applicants in FY 2021-22. Accordingly, the sales for the purpose of availing incentives will be accounted for 5 years starting from FY 2022-2023 instead of FY 2021-2022.

The last date for receiving applications under the scheme has also been extended by a week to November 30, 2020.


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