Pharma MSMEs oppose revised PLI riders as focus on GMR deters new investments

Bengaluru, July 24, 2021:

The Union government’s PLI scheme’s new riders focusing on global manufacturing revenue (GMR) instead of investments is a deterrent and an illogical move, according to pharma MSMEs.

MSMEs stated that they stand no chance against the cutthroat competition to make it to the final list of beneficiaries for the scheme.

In fact, MSMEs have questioned the purpose of the scheme, since it now benefits only the established top 20 companies instead of promoting investments and new products, which was originally the government’s objective.

Sunil Mundra, managing director, Natural Capsules, who been selected under the PLI 1 scheme to manufacture at a Greenfield project, noted that PLI 2 announced on June 2 and with a recent deadline extension grant to August 15 said that the removal of investment as a yardstick and bringing in the criteria of GMR was a major change in the announcement. This is a major deterrent for MSMEs as it clearly benefits only the large pharma companies having a global presence.

Although the government’s move to restrict the application to only one company is a good step, removing the new investment or Greenfield component and instead focusing on Brownfield with a criteria of past turnover, company size and the number of US FDA plants will make only the top 20 established companies eligible to apply, said Mundra.

According to Dr Dinesh Dua, Mentor & Advisor, immediate past chairman, CII Pharma Committee, North India, though the PLI 1 and 2 versions are landmark decisions by the Union government, it had denied opportunities to Brownfield projects for incentivisation. This is because Department of Pharmaceuticals (DoP) had noted that calculation of incentives would be a difficult in a Brownfield project. But the intervention of DoP secretary S Aparna, who took up the cause following requests from Indian pharma companies, has brought in relief.

“DoP made a special concession stating that in case a separate plant is put up in the same premises next to the existing one, then that would be considered as Greenfield project within the Brownfield venture. Now, this means that the baseline for the new plant will be zero because it is viewed strictly as a plant within the same premises of the existing facility. In this case, it gives leeway to entrepreneurs who applied for the PLI - and it is obvious that for PLI -2 also similar concession would be given. Now, this is good for the industry because it is viable, said Dr Dua.

Jatish N Sheth, director Srushti Pharma said the government has made it too competitive for MSMEs. Instead, they could have been more specific on the products rather than making it broad based. For instance, biopharmaceuticals too have scores of antibiotics coming under this category.

The reality will be maximum applicants and minimum allotment. There will be over 1,000 applications for 20 eligible MSMEs. The whole effort of applying will be a futile exercise for MSMEs like Srushti, noted Sheth.

According to Manoj Palrecha, managing director, Lake Chemicals, PLI scheme is laudable as it motivates companies to invest, expand operations and generate employment opportunities from an MSME perspective. But the component of Brownfield is seen to benefit only large players and not MSMEs. In the past, when the government offered excise sops, it was the large companies that invested in the erstwhile excise-free zones in Baddi, Uttaranchal and Sikkim. Pharmabiz