Pharma industry appreciates modification in PLI scheme, seek more support

The Department of Pharmaceuticals (DoP), for promotion of domestic manufacturing of critical key starting materials (KSMs), Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs), has given the revised guidelines for production linked incentive PLI scheme considering several suggestions and inputs from the pharma industry seeking certain amendments in the scheme to enable their effective participation.

Changes in the revised guidelines for Pharma PLI Scheme:

1. Replacement of the criteria of ‘minimum threshold’ investment with ‘committed’ investment by the selected applicant. The change has been made to encourage efficient use of productive capital as the amount of investment required to achieve a particular level of production depends upon the choice of technology and it also varies from product to product. The provision for verification of the actual investment made by the selected applicant for the purpose of giving incentives under the scheme continues.

2. Deletion of the provision which restricts the sales of eligible products to domestic sales only, for the purpose of eligibility of receiving incentives, bringing the scheme in line with other PLI schemes and encouraging market diversification.

3. Change in the minimum annual production capacity for 10 products viz Tetracycline, Neomycin, Para Amino Phenol (PAP), Meropenem, Artesunate, Losartan, Telmisartan, Acyclovir, Ciprofloxacin and Aspirin. Minimum annual production capacity is a part of the eligibility criteria under the scheme.

Criteria which remains the same in the revised notification are:

1) Number of players to be selected per molecule, 4 for Fermentation based API and 2 for chemical-based API.
2) Total outlay of the scheme over its tenure continues to be Rs 4,960 crores.
3) Incentive per cent remain the same as earlier declared.

The industry has appreciated the government’s move to revise the scheme but also recommend some more changes/revisions.

Yogin Majmudar, Chairman of Bulk Drug Committee, IDMA commented, “We appreciate the move of the Government of removing the compulsory minimum threshold investment criteria from the earlier announced PLI schemes. From the past experience of the industry, there is a lurking danger of Chinese predatory pricing movement once indigenous manufacturers commence operations. Therefore, IDMA has conveyed to the Government that in such instances appropriate measures will have to be expeditiously taken by them to protect indigenous manufacturing activity.”

BR Sikri, VP, BDMA and Chairman, FOPE, praised the positive action taken by the GoI, DoP based on the recommendations of the industry. He further requested the Secretary about anti-dumping duty. He suggested that recommendations should go to Anti-dumping Directorate to expedite their (industry’s) applications in three months period in future, whenever any situation comes where China starts dumping material whereas at present it takes almost one year to one and half years to get relief of antidumping.

He also commented that demand from the Government to declare the cost of the product now is unjustifiable because it is not possible to maintain the cost which the companies are declaring today because, after two years, the cost of the end product is dependent on the cost of raw material, manpower cost, raw material cost, power cost, water cost and many other costs.

S V Veerramani, Chairman and Managing Director, Fourrts (India) Laboratories and Past President, IDMA expressed, “The recent revisions in the PLI scheme guidelines are most welcome. We request that the scheme should be allowed for brownfield units as well. This is because many of the existing brownfield units have unutilised capacities, which can be put to use instead of adding more burden of investments. Further, they can also get into production quickly to make the import substitute APIs, intermediates and KSMs, since creating a new facility will take more time, especially for getting pollution control clearances.

Sudhir Vaid, Owner, Concord Biotech highlighted, “The listed fermentation APIs in the PLI are all matured and old APIs. Except a few, all were earlier being produced in India. I was expecting that the PLI scheme will include brownfield projects also to manufacture these API costs effectively. It would have been good if they could have included existing fermentation products also being manufactured in India to give a boost to the fermentation industry. I strongly feel that the PLI scheme will only be beneficial for the fermentation industry if the latest fermentation technologies are made available for these matured products otherwise it will be difficult for the new units to run profitably, even with the support of PLI scheme.

Nipun Jain, Chairman, Small and Medium Pharma Manufacturers Association (SMPMA) expressed, “The removal of minimum investment threshold criteria is a welcome move and will especially benefit the MSME players. It will work in favour of the industry along with achieving the central government’s objective of making the industry self-reliant. Globally, the Indian pharma industry is known as the ‘Pharmacy of the World’ in the formulation segment and now with this modification in the PLI scheme, we will also be known in the API segment.

Dr Viranchi Shah, National Vice President, IDMA expressed, “The revised PLI scheme has taken care of most of the points raised by the industry. I am hopeful that the new policy will help the industry to grow and replace imported APIs, a right step towards Atma Nirbhar Bharat.”

Kunal Dhamesha, Senior Healthcare Analyst, Emkay Global Financial Services said, “According to the revised API PLI (Production linked incentive scheme) notification, it seems exports of mentioned 41 API/ Intermediates/ KSMs will also be eligible for incentives. This, in our view, is positive for the pharma sector as non-eligibility of exports for incentives under the original scheme kept most mid to large size pharma names on the sidelines. While the scheme document doesn’t explicitly mention eligibility of exports for incentive, subtle language change (as compared to prior notification) suggest possible inclusion of exports.”

He continued, “Other notable changes in the revised notification is the removal of minimum investment threshold criteria for all molecules. However, they have retained minimum annual production capacity as a threshold. At the same time, they have reduced the minimum annual production capacity required for certain molecules. While we see the inclusion of exports as a positive move for the industry, capping of incentive per molecule could still be a limiting factor for participation under the scheme. Moreover, incentivising export could come under the scanner of WTO, which led to discontinuation of the earlier export incentive scheme for pharma formulations.”

The last date for receiving applications under the scheme is now extended by a week to November 30, 2020.