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The production-linked incentive (PLI) schemes announced by the Government for key raw materials such as bulk drugs and formulations, with a total incentive outlay of ₹21,000 crore, will help reduce import dependence, boost domestic production of high-value products and increase the value addition in exports.
The PLI-II scheme is expected to significantly boost production of high-value products and increase the value addition in exports of formulations/ key starting materials (KSMs), drug intermediates (DIs) and active pharmaceutical ingredient (APIs), according to ICRA.
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Bulk drug parks for APIs
High value-added pharmaceutical products are generally R&D intensive and difficult to manufacture and these include products such as complex generics, patented products, and biologics among others.
The Centre has announced the promotion of the bulk drug parks scheme with a financial outlay of ₹3,000 crore for three select states, which will provide infrastructure assistance to the API players.
Gaurav Jain, Vice-President, ICRA, in a statement said: “The Phase-I of the PLI scheme, announced in July 2020 and approvals accorded through April 2021, for API players focuses on reducing the increased dependence on imports by setting up greenfield plants with prescribed minimum value addition. As per industry estimates, India imported approximately ₹25,000 crore worth of key starting materials, drug intermediates and APIs in FY2020, with 65-70 per cent of such imports from China. ICRA expects the imports from China to reduce by approximately 25-35 per cent once such capacities are fully commercialised.”
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Thrust on exports
The PLI-II scheme announced in February 2021 focuses on the production and diversification into high-value pharmaceutical products with a thrust on exports. It covers R&D expenses incurred for product development as part of the eligible investments in addition to provision to change the initially committed product mix up to five times during the scheme’s tenure.
This will provide the flexibility for R&D-based investments. With an approved outlay of ₹15,000 crore across categories to be disbursed over the FY2023-28 period, the scheme is expected to generate incremental sales of ₹2.94-lakh crore (including exports of ₹1.96-lakh crore) over the six-year scheme period.
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