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Financial Assistance for setting up Bulk Drug Parks under PLI

March 2, 2021

The Union Government has recently approved Production Linked Incentive Scheme for Pharmaceuticals over a period of Financial Year 2020-21 to 2028-29. The Scheme is expected to benefit domestic manufacturers, help in creating employment and also contribute to the availability of wider range of affordable medicines for consumers in India[1].

It has been estimated that Indian Pharmaceutical society is the 3rd largest in the world. The worth of Pharmaceutical Industry in terms of value is 40 Billion and India contributes to almost 5% of total drugs and medicines exported globally[2].

Applicability of the PLI Scheme

The Scheme has mapped out the manufacturers of pharmaceutical goods registered in India on the basis of their GMR-Global Manufacturing Revenue.

The scheme has following criteria for the groups of applicants:

S.No. Target Group GMR Value (F/Y 2019-2020) of  Pharmaceutical Goods Quantum of Incentive
1. Group A More than or equal to 5000 Crores Rs 11,000Crore
2. Group B Between INR 500 Crores to INR 5000 Crores Rs 2,250 Crore
3. Group C Less than INR 500 Crores Rs 1,750 Cr

Category of Goods

The scheme shall cover pharmaceutical goods under three categories:

  1. Category 1

Biopharmaceutical, complex generic drugs, patented drugs or drugs nearing appetent expiry, cell based or gene therapy, orphan drugs, special emptycapsules like HPMC, Pullulan, enteric, complex excipients, other drugs as approved.

  1. Category 2

Active Pharmaceutical Ingredients/ Key Starting Materials/Drug Intermediaries

  1. Category 3

Repurposed drugs, Auto immune drugs, anti-cancer drugs, anti-diabetic drugs, anti-effective drugs, cardiovascular drugs, psychotropic drugs, and anti-retroviral drugs, in vitro-diagnostic devices and other approved drugs.

The scheme has proposed incentives of Rs 15, 000 Crores and the benefits from the categories are transferrable from Group A to Group C applicants.

Implications of Scheme

The scheme is aimed to be self-reliant for important drugs.

S.No. Proposed Benefits Benefits
1. Rearrangement towards the development of complex and high tech-products in the fields of In-Vitro-Diagnostic Services. Rs 15,000 Crores investment
2. Incremental Sales Within 6 years (2022 to 2028)

Rs. 2,94,0000 Crores

3.        Incremental Exports Within 6 years (2022 to 2028)

Rs. 1,96,0000 Crores

4.        Increase in Jobs Directly 20,000 jobs and Indirectly by 80,000 jobs.

Benefits to Pharmaceutical Manufacturer from the PLI Scheme[4]

S. No. Benefits
1. Capital Linked Incentive Scheme– it subsidizes some percentage of investment.
2. Expenditure Linked Incentives-
a. Tariff Subsidies-a trade subsidy to domestic manufacturer reduces the domestic cost of manufacture.
b. Stamp Duty Reimbursement– a tax to the government for the sale or purchase on the specified instruments.
3. State Linked Incentives
a.

 

SGST Reimbursement– it is the Goods Service tax benefit given to the manufacturer.
b. Turnover Based Subsidy– a benefit over the net investment value.
4. Mega Units customized Incentives from States– a customized schemes by the respective states.
5. Duty Scrips from Foreign Trade Transactions-a duty credit scrip issued by the DGFT and used to pay for the taxes to CG.
6. Reduced Corporate Tax Rates

For Category of Goods –Active Pharmaceutical Ingredients/ Key Starting Materials/Drug Intermediaries[5]

Benefit Allowed Percentage or Amount Allowed
Financial Assistance 1.      Financial assistance to a selected Bulk Drug Park would be 70% of the project cost of common infrastructure facilities.

2.       In case of North Eastern States and Hilly States (Himachal Pradesh, Uttarakhand, Union Territory of Jammu & Kashmir and Union Territory of Ladakh) financial assistance would be 90% of the project cost.

3.      Maximum assistance under the scheme for one Bulk Drug Park would be limited to Rs. 1000 crore

Common Infrastructure Facilities The common facilities provided to individual bulk drug units in the Bulk Drug Park such as central effluent treatment plant, solvent recovery and distillation plant, steam generation and distribution system, common cooling system and distribution network, common logistics facilities, advance laboratory testing center, emergency response center, center of excellence etc.

Conclusion

It is accounted that India Exports low generic drugs components. The large production of the drugs from the longest times have been met through the imports. It has been reported that Indian Pharmaceutical sector lacks necessary pharma R&D and high value production has never accomplished.

In order to enrapture, the global markets, our domestic players need to enhance productions in diversified product categories. The domestic market needs to be stimulated with the requisite funds and schemes for the high value goods such as bio-pharmaceuticals, complex generic drugs, patented drugs or drugs meeting patent expiry, or cell based or gene therapy.

The PLI Scheme floated by the Government for Pharmaceuticals is expected to promote the production of high value products in the country and increase value addition in the exports.

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PLI Scheme for Electronic Manufacturing

[1] https://pib.gov.in/PressReleasePage.aspx?PRID=1700433

[2] ibid

[4] https://www.ey.com/en_in/tax/india-tax-insights/how-production-linked-incentives-can-help-boost-india-manufacturing-sector

[5] https://pharmaceuticals.gov.in/sites/default/files/Gazettee%20notification%20of%20bulk%20drug%20schemes.pdf

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