DoP Revises Guidelines For Funding To Develop CFCs At Pharma Parks

New Delhi, 7 Feb 2019: The Department of Pharmaceuticals (DoP) has revised the norms for implementing a Centre-state financial assistance scheme to help drug makers develop common facility centres (CFCs) such as testing units, R&D centres and effluent treatment plants at industrial parks. 

The public-private partnership initiative, announced last year, is aimed at supporting bulk drug and medical device manufacturers. It was one of the key recommendations made by the Katoch Committee to boost active pharmaceutical ingredient manufacturing (API) in India.

As per the revised guidelines reviewed by Pharmabiz, the maximum limit for the grant-in-aid under this category would be Rs.20 crore per cluster or 70 per cent of the project cost, whichever is less. The one-time grant will be released to special purpose vehicles (SPVs) and will be admissible for creation of common facilities by government as well as private entrepreneurs. 

The move to help industry set up common facilities would help lift the bottom line of many small and medium drug makers. Since the API and intermediate units are spread across the country with a significant presence in only four or five states, the benefit of common facilities such as central effluent treatment plants, captive power plants and incubation centres is not always available making the sector uncompetitive. According to industry sources, the proposed scheme is intended to address this issue. A well-equipped CFC can slash the cost of production by 25 per cent in the bulk drug park and help increase competitiveness, they say. 

Regulatory requirements for the formation of SPVs are stipulated in the revised norms. The SPV should be a legal entity registered under the Companies Act or Registration of Societies Act. It should have a provision for enrolling new members to enable prospective entrepreneurs in the cluster to utilise the facility which is being provided.

There should be a minimum of three pharma units, including bulk drug and medical device plants, as members though there is no ceiling on the maximum number of SPV members.

“However, where only state government or an agency of the state government is applicant under the scheme without private participation, the SPV formation may not be insisted upon, instead they should just create an Escrow/TRA account so that funds are utilised only for the project purpose,” the new guidelines read.

SPVs could dovetail funds from other sources as well for the project, provided there is no duplication of funding for the same component or intervention. But resources raised through this mode will be in addition to the 30 per cent mandatory contribution of the SPV.

Pharmaceutical enterprises should hold at least 51 per cent equity of the SPV and the combined net worth of its members must be equivalent to the total grant amount applied for. Moreover, each SPV member must have a net worth of at least 1.5 times of their proposed equity contribution.

Once implemented, the funding package would be a relief for the domestic API manufacturers who have been vocal in their criticism of the government over the prevailing regulatory challenges. Despite producing a fifth of the world’s generic drugs, India imports around 80 per cent of APIs from China on volume basis. The data released by the Pharmaceuticals Export Promotion Council shows a rise of 50 per cent in the import of drug formulations from China in the last five years.Pharmabiz