Centre announces ₹10,000-cr booster for local drug production

Maitri Porecha New Delhi | Updated on July 27, 2020

Industry players sceptical about greenfield investments

The Centre announced a ₹10,000-crore booster for ramping up domestic production of raw materials for producing drugs and indigenous medical devices on Monday.

Minister for Chemicals and Fertilisers DV Sadananda Gowda launched schemes from the Department of Pharmaceuticals for promotion of domestic manufacturing of bulk drugs and medical devices parks in the country.

Addressing the media he said, the proposal is divided into four key segments — Production Linked Incentive Scheme (PLI) for Active Pharmaceutical Ingredients (APIs) which consists of an outlay of ₹6,490 crore, ₹3,000 crore in all for three bulk drug parks, outlay of ₹3,420 crore for PLI scheme for medical devices, and grant-in-aid of ₹400 crore in all for four medical device parks.

PD Vaghela, Secretary, DoP, said, “This booster including incentives will bring in an expected investment of ₹77,900 crore, and generate employment for 2,55,500 persons. Applicants will be selected on basis of capacity of proposed plant and sale price of APIs they offer. We are looking for those companies which are offering APIs at the cheapest price,” said Vaghela.

But, according to industry, it will take at least six months for pharma companies to apply and get approvals for PLI scheme to manufacture APIs, which are basic raw materials to produce drugs.

The technical committee of bulk drugs identified 53 critical key starting materials, drug intermediaries and API for doling out incentives linked with starting indigenous manufacturing to in all 136 applicants.

In the PLI scheme for APIs, in case of Penicillin G which is a key fermentation-based starting material for several antibiotics, two pharma manufacturers can apply, and have a minimum production capacity of 5,000 tonnes.

After producing invoices of sales, the selected companies will receive reimbursements of ₹120 crore each annually for first four years, ₹90 crore in the fifth year and ₹30 crore in the sixth year, provided they have managed to sell their APIs.

Vaghela said, majority of bulk drugs are imported, and they form 63 per cent (up to $3.41 billion) of total pharma imports during 2019-20.

Medical devices imports

For medical devices, the industry depends on imports up to an extent of 86 per cent. Domestic manufacturing is limited to surgical, cardiac stents, general medical devices and consumables. Imports have increased from ₹26,779 crore in 2015-16 to ₹41,412 crore in 2019-20, largest chunk being electronics and equipment, consumables and disposables and surgical instruments.

PLIs in medical devices are targeted specifically at those companies which manufacture for cancer care and radiotherapy, radiology and medical imaging devices, anesthetics and cardio respiratory medical devices and all implants including cochlear implants and pacemakers.

“Minimum investments should be of ₹180 crore with a minimum net worth ₹18 crore,” Vaghela said.

Industry view

A top pharma company official said, “We will review the scheme and consider whether to apply for it or not. Also, fresh greenfield investments to produce APIs will take another two years to come to fruition if a company decides to apply.”

In case of medical device parks, Vaghela said minimum area should be 1000 acres and for hilly areas it should be 700 acres. He said, the states will be seelcted based on certain parametres and that states should apply within two months and in-principal approval within a month. The allocation may be cancelled if no production occurs in the state within two years of allotment.

According to DoP data, pharmaceuticals and medical devices industry in India is worth is ₹3,79,751 crore. Of this ₹2,08,729 crore consists of the domestic market. Another ₹81,551 crore is import dependent, while ₹1,71,022 crore is exports.

Published on July 27, 2020

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