Govt Announces Rs. 13,760-Cr Package To Boost API and Medical Device Production

Mumbai, 24 March 2020:

With the coronavirus outbreak disrupting supply of active pharmaceutical ingredients (APIs) and medical devices from China to India, the government has come out with four schemes worth Rs 13,760 crore to encourage manufacturing of bulk drugs and medical devices in the country and their exports.

On March 21, the Union Cabinet under the chairmanship of Prime Minister Narendra Modi had approved an expenditure of Rs. 9,940 crore and Rs. 3,820 crore for APIs and medical devices, respectively.

The Cabinet also approved a scheme on promotion of bulk drug parks for financing common infrastructure facilities in three bulk drug parks with financial implication of Rs. 3,000 crore for next five years. The government will give grants-in-aid to states with a maximum limit of Rs. 1,000 crore per bulk drug park. Parks will have common facilities such as solvent recovery plant, distillation plant, power and steam units, common effluent treatment plant etc.

The government further approved production linked incentive (PLI) scheme for promotion of domestic manufacturing of critical KSMs/drug intermediates and APIs in the country with financial implications of Rs. 6,940 crore for next eight years.

Financial incentive will be given to eligible manufacturers of identified 53 critical bulk drugs on their incremental sales over the base year (2019-20) for a period of 6 years.

Out of 53 identified bulk drugs, 26 are fermentation based bulk drugs and 27 are chemical synthesis based bulk drugs.

Rate of incentive will be 20 per cent (of incremental sales value) for fermentation based bulk drugs and 10 per cent for chemical synthesis based bulk drugs.

The PLI scheme will lead to expected incremental sales of Rs. 46,400 crore and significant additional employment generation over eight years.

The drug industry has welcomed the incentives offered by the government to promote API units in India.

Said Sudarshan Jain, secretary general of Indian Pharmaceutical Alliance, “We welcome the government’s step to promote domestic manufacturing of critical KSMs/intermediates and APIs in the country. This is a major step in the creation of a self-sufficient healthcare ecosystem in the country. The country has capability and competence to produce all APIs. The announcement by the government will help revive the API industry in the country and will help the sector regain the dominance that was lost over the years.”

Said Vinod Kalani, co-chairman, Federation of Pharma Entrepreneurs (Fope), “The government has taken a welcome step. Indian API makers need government’s support in making API price competitive as against Chinese APIs for next five years. There should be fast approval from pollution control board for API units.”

Besides APIs, the Cabinet also approved the scheme for promotion of medical device parks in the country in partnership with the states. A maximum grant-in-aid of Rs. 100 crore per park will be provided to the states. It will have financial implications of Rs. 400 crore.

The PLI scheme for promoting domestic manufacturing of medical devices will have financial implications of Rs. 3,420 crore for next five years.

Medical device is a growing sector and its potential for growth is the highest among all sectors in the healthcare market. It is valued at Rs. 50,026 crore for 2018-19 and is expected to reach to Rs. 86,840 crore by 2021-22. India depends on imports up to an extent of 85 per cent of total domestic demand of medical devices.

The medical device sector suffers from a cost of manufacturing disability of around 12 per cent to 15 per cent, vis-a-vis competing economies, among other things, on account of lack of adequate infrastructure, domestic supply chain and logistics, high cost of finance, inadequate availability of quality power, limited design capabilities and low focus on R&D and skill development, etc. There is, thus, a need for a mechanism to compensate for the manufacturing disability.

The PLI scheme aims to boost domestic manufacturing by attracting large investments in medical device sector. Under the scheme, incentive at the rate 5 per cent of incremental sales over base year 2019-20 will be provided on the segments of medical devices identified under the scheme.

Under the sub-scheme for promotion of medical device parks, common infrastructure facilities would be created in four medical device parks, which is expected to reduce manufacturing cost of medical devices in the country.

Welcoming the government’s initiative to promote medical device manufacturing in India, RajivNath, forum coordinator, AiMeD said “Such a visionary move by the government will help address Indian healthcare security concerns- the inadequacy of which is being exposed in ongoing crisis to address the coronavirus pandemic preparedness. The schemes announced will help boost local manufacturing.” Pharmabiz