Schemes for Pharmaceuticals Manufacturing

Scheme 1

Production Linked Incentive Scheme (PLI)

Overview

The Production Linked Incentive (PLI) Scheme for promotion of domestic manufacturing of critical Key Starting Materials (KSMs)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) in India. Production Linked Incentives of upto Rs. 6,940 crores have been approved.

A financial incentive will be given to eligible manufacturers of identified 41 eligible products which covers 53 APIs, for 6 years, based on threshold investment and domestic sales made by the selected applicant for the eligible products. The rates will vary for Fermentation based products and Chemically Synthesized products.

Scheme

Scheme

Scheme

Scheme

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Scheme

Highlights

Incentives

Fermentation products:
FY 2022-26: 20%
FY 2026-27: 15%
FY 2027-28: 5%

Chemically synthesized products:
FY 2021-27: 10%
Eligibility

Support is provided only to manufacturers of critical KSMs, Drug Intermediates and APIs in India for products manufactured with complete backward integration
Tenure of scheme

Tenure of the Production Linked Incentive Scheme is FY 2020-21 to FY 2029-30. Base year of the scheme is FY 2019-20.

Target Segments Eligible under PLI Scheme

The four segments into which the eligible KSMs/DIs/APIs products have been divided based on their criticality and import dependence namely:

Key Fermentation based KSMs/DIs
Niche Fermentation based KSMs/DIs/APIs
Key Chemical Synthesis based KSMs/DIs
Other Chemical Synthesis based KSMs/DIs

Please click here for the detailed list of products.

Eligibility

Eligibility for selection

The project shall be a greenfield project
The Net Worth of the Applicant (including that of Group Companies), as on the date of application, shall not be less than 30% of the total proposed investment.
The proposed Domestic Value Addition (DVA) by the applicant shall be at least 90% in case of fermentation-based product and at least 70% in case of chemical synthesis-based product.

Eligibility for incentive

A selected applicant must meet both the eligibility criteria of threshold investment and minimum annual production capacity as given here
The applicant shall have to achieve minimum stipulated domestic value addition (DVA) (90% for fermentation-based product and 70% for chemically synthesis-based products) for a claim period in order to remain eligible for receiving incentive for that claim period.
Eligibility under the Scheme shall not affect eligibility under any other scheme and vice versa.

For a further, comprehensive list of eligibility criteria, please click here.

Process Flow

Step One

Application Process

Submission of Application – Applicant
- Application fees (Please click here for details)
Prima Facie Examination– Project Management Agency (PMA)
Letter of Acknowledgement issued – PMA
- Letter of Acknowledgement to be issued within 15 working days post completion of examination
Application Appraisal – PMA
- Each application shall be reviewed and details shall be entered in the detailed checklist by the PMA upon receipt of the application.
- The PMA will accordingly make appropriate recommendations to the Technical Committee (TC) for approvals under the Scheme.
- The final recommendations of the PMA and the Technical Committee shall be placed before Empowered Committee (EC) for its approval.
- All the applications shall be finalized within 60 days from the date of issuance of acknowledgement of receipt of the application.
Approval Letter to Applicant (within 5 working days of receiving approval from the Competent Authority – Department of Pharmaceuticals (DoP)
- The aforesaid approval letter shall not be construed as a guarantee for disbursement of incentive as the same will be dependent upon verification of eligibility after submission of disbursal claim and other criteria defined in these Guidelines.
Submission of Bank Guarantee along with undertaking
- The selected applicant shall submit, within two weeks of date of issuance of approval letter by the PMA a bank guarantee along with undertaking, in the format given at Appendix D of the official detailed guidelines of an amount equivalent to 1% of the committed investment in favour of DoP, valid for 365 days to be rolled over till the time 90% of the committed investment in the project is made.

Step Two

Disbursement Process

Submission of Claim for Disbursement of Incentive (submitted only on a half-yearly/annual basis)– Applicant
Verification of Claims and Application for Incentives – PMA
- In case of any doubt with respect to determining eligibility and incentive amount due, the PMA may refer to DoP for clarification.
Disbursement of Funds – PMA
- PMA to disburse funds after completion of all pre-disbursal formalities by the applicant and approval from the Competent Authority within 60 days of receipt of the claim.
- Applicants will be required to reconcile Incremental Sales of eligible products, based on which claims for disbursement of incentive have already been filed, with documents as prescribed by the PMA, by 31 December of the financial year subsequent to which the claim pertains
- Verification of the reconciliation of disbursement claims – PMA

For further clarification, please refer to the detailed guidelines.

FAQs

Frequently Asked Questions

Who can be an Applicant under the PLI Scheme for APIs, KSMs and Drug Intermediaries?

Applicant for the purpose of the Scheme shall be any Proprietary Firm or Partnership Firm or Limited Liability Partnership (LLP) or a Company registered in India proposing to manufacture eligible products and making an application for seeking approval under the Scheme. The applicant shall invest threshold investment in any Greenfield Project.
What are the target segments and respective eligible products covered under PLI Scheme?
Target Segment shall mean one of the four segments viz.:
- Key Fermentation based KSMs / Drug Intermediates
- Niche Fermentation based KSMs / Drug Intermediates / APls
- Key Chemical Synthesis based KSMs / Drug Intermediates
- Other Chemical Synthesis based KSMs / Drug Intermediates/ APls
Eligible Products:

Product manufactured in India and included in the 'List of Eligible Products' in Appendix A of the Guidelines. There are 41 eligible products for which the Scheme is proposed covers the 53 APIs that have bene approved by Government.
Can the company be 100% foreign-owned or is 51% share by a local required (under PLI Scheme)?

There is no restriction in the foreign ownership under the PLI Scheme for Bulk Drugs.
Can the land used for the manufacturing facility have foreign ownership (under PLI Scheme)?

The foreign ownership of land is not under the preview of these Guidelines.
Does the PLI scheme provide a subsidy for the land used?

There is no provision for a subsidy for land under the PLI Scheme for Bulk Drugs.
Does "Threshold investment" mean this is the minimum investment required from the investor (under PLI Scheme)?

As per clause 2.32, Threshold Investment is the minimum investment required by an for each eligible product. The amount of threshold investment depends upon the product for which application is being filed by the applicant. Appendix B of the detailed guidelines provides detail of threshold investment required for each product.
What does appendix E of the detailed guidelines for PLI Scheme show?

Table 1 of Appendix E refers to the total incentive available for each Target Segment and the number of products covered under that Target Segment.

Accordingly, 04 - Fermentation Based KSM/ Drug Intermediaries refers to the maximum incentive available for 4 products covered under that Target Segment, in the applicable financial year and during the tenure of the Scheme.

Table 2 of Appendix E gives detail of maximum incentive available to any applicant across the tenure of the Scheme.
To calculate the rate of incentive under PLI Scheme, which FY sale revenue figure is used?
- Please refer to paragraph 14 of the detailed guidelines.
- The incentive under this Scheme shall be calculated on the Net Sales (Domestic) of Eligible Product for any financial year at the rate given in Table 2 of Appendix E.
- For example, in case of Penicillin G incentive shall be calculated on Domestic Sales of FY 2023-24 (as determined, in accordance with Scheme Guidelines) at 20%.
Is the PLI scheme applicable for 2020-2021?
- The Scheme is effective from July 27, 2020. The Scheme has two Phase (i) Setting up a greenfield project under the Scheme and (ii) Sales eligible for incentive. Please refer clause 7.7 of the Scheme Guidelines, which provides for a gestation period of 1 year for chemical synthesis and 2 years for fermentation based products.
- Investment made on or after April 01, 2020 in the Greenfield Project (refer clause 6.1.1) shall be considered for threshold investment. Accordingly, any investment made during FY 2020-21 shall be considered for threshold investment.
- Incentive under this scheme shall be applicable on the sales from FY 2023-24 for fermentation based product and from FY 2022-23 for Chemically Synthesized based product.
Are there any corporate income tax exemption available under the PLI Scheme?

There is no corporate tax exemption provided under this Scheme.
What is the eligibility for selection under PLI Scheme?
- Eligibility for selection
  The project shall be a greenfield project as defined under the guidelines.
  
  The Net Worth of the Applicant (including that of Group Companies), as on the date of application, shall not be less than 30% of the total proposed investment. The Applicant not meeting the said Net Worth criteria shall not be eligible.
  
  The proposed Domestic Value Addition (DVA) by the applicant shall be at least 90% in case of fermentation-based product and at least 70% in case of chemical synthesis-based product.
  
  The applicant should not have been declared as bankrupt or willful defaulter or defaulter or reported as fraud by any bank or financial institution or non-banking financial company.
- Eligibility for incentive
  A selected applicant must meet both the eligibility criteria of threshold investment and minimum annual production capacity as given in Appendix B of the detailed Guidelines released by DoP.
  
  A selected applicant will have to separately meet the eligibility criteria of minimum annual production capacity and threshold investment for each of the eligible products, for which approval has been granted under the Scheme.
  
  In case, the committed annual production capacity and corresponding investment committed is more than minimum annual production capacity and threshold investment as given in Appendix B of the detailed Guidelines released by DoP, the selected applicant shall have to complete the installation of committed annual production capacity and make committed investment, as stated in the approval letter, in order to be eligible to claim incentive.
  
  The applicant shall have to achieve minimum stipulated Domestic Value Added as per Clause 4.1.3 (90% for fermentation based product and 70% for chemically synthesis based products) for a claim period in order to remain eligible for receiving incentive for that claim period, subject to relaxation given in Clause 4.2.5.
  
  If the OVA achieved for any particular claim period is between 80% to 90% in case of fermentation-based product and between 60% to 70% in case of chemical synthesis-based product, the applicant will get 50% of the eligible incentive. This relaxation would be available for a period of 12 months only (one claim period of 12 months or any two claim periods of 6 months) during the tenure of the Scheme.
  
  If the incentive availed by an applicant for any financial year, for any reason, is less than the maximum available incentive for that applicant in that financial year, the applicant shall not be entitled to claim the differential amount in subsequent financial years.
Why are there 41 products listed but 53 KSMs under PLI Scheme?

The 41 eligible products for which the Scheme is proposed covers the 53 APls which have been approved by the Government. The list of eligible products can be found in Appendix A of the detailed Guidelines released by DoP.
What is the role of the Project Management Authority (PMA), Technical Committee (TC) and Empowered Committee (EC) under PLI Scheme?
Project Management Agency (PMA): Refers to the financial institution(s) or any other authority(ies) appointed by the DoP to act on its behalf for receipt and appraisal of applications, verification of eligibility and examination of disbursement claims through any method / document deemed appropriate and for managing the above-mentioned in accordance with the guidelines.
The Scheme will be implemented through a Project Management Agency (PMA) which will be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by DoP from time to time.

Technical Committee (TC): A Technical Committee constituted by DoP to assist the Empowered Committee for discharging its functions.
TC will also give its comments on any technical matter referred by DoP

Empowered Committee (EC): A committee constituted by DoP and comprising of the following members:
- CEO, NITI Aayog (Chairman)
- Secretary, Department of Pharmaceuticals
- Secretary, Department of Chemicals and Petrochemicals
- Secretary, Department for Promotion of Industry & Internal Trade
- Secretary, Department of Commerce
- Secretary, Ministry of Environment, Forest and Climate Change
- Secretary, Department of Health & Family Welfare
Experts may be invited as special invitees, as may be felt necessary, from time to time.
The EC shall meet as often as necessary to ensure timely consideration of applications and disbursement claims and conduct periodic review of the Scheme.
What is the period for/deadline for making an application under the PLI Scheme?

The application window shall be open for 120 days from the date of issuance of the guidelines (as issued on 27 July 2020).
What if an applicant exceeds the minimum annual production capacity under PLI scheme?

An applicant may commit annual production capacity higher than the minimum annual production capacity. However, the capacity committed shall be in whole number multiple of the minimum annual production capacity, along with commitment to invest corresponding multiple of threshold investment, as specified in Appendix B of the detailed Guidelines released by Department of Pharmaceuticals.

For example, in case of Penicillin G the minimum annual production capacity eligible for incentive is 5,000 MT and threshold investment is INR 400 crores. An applicant may commit 10,000 MT annual production capacity along with commitment to make investment of INR 800 crores.
If an applicant avails less than the maximum available under PLI Scheme incentive for that applicant in that financial year, can it be claimed in subsequent years?

If the incentive availed by an applicant for any financial year, for any reason, is less than the maximum available incentive for that applicant in that financial year, the applicant shall not be entitled to claim the differential amount in subsequent financial years.
What categories of expenditure are considered for determining threshold investment under the PLI scheme? Does it include R&D (and associated R&D manpower), machinery used to make other KSMS/DIs/APIs, consumables, raw materials/plant machinery and equipmen

Expenditure incurred on new Plant, Machinery, Equipment and Associated Utilities:

This shall include expenditure on new plant, machinery, equipment and associated utilities. It shall also include expenditure on packaging, freight/ transport insurance, and erection and commissioning of the new plant, machinery, equipment including laboratory equipment and associated utilities. Associated utilities would include essential equipment required in operation areas such as Clean Rooms, Air Curtains, Temperature and Air Quality Control Systems, Compressed Air, Water & Power Supply and Control Systems. Associated utilities shall also include ETP, incinerators, effluent lines / tanks / treatment, supply lines of water / sewerage / solvents/ gases, solvent recovery, solid waste treatment plant, solvent storage tanks, LPG storage tanks, warehousing, electricity lines, power generation facility and communication lines for telephone internet within the establishment. All non-creditable taxes and duties would be included in such expenditure.

Expenditure incurred for establishment of new Research and Development (R&D) facility:

This shall include capital expenditure, R&D and product development related to eligible product only. All non- creditable taxes and duties would be included in such expenditure.
No second hand/ used I refurbished plant, machinery, equipment, utilities or R&D equipment shall be used to manufacture the eligible product.

Expenditure incurred on Land:

The expenditure incurred on land required for the project / unit shall not be considered for determining threshold investment.

Expenditure incurred on Building:

This shall include expenditure on construction of building where new plant and machinery are installed and shall also include expenditure on associated infrastructure including internal roads and compound wall. However, the expenditure on the associated infrastructure shall be limited to 20% of the investment in new plant & machinery. Further, expenditure on guest house building, recreational facilities, office building, residential colonies and similar structures shall not be considered for determining the threshold investment.
How will the Domestic Value Added (DVA) be calculated under PLI scheme?
Domestic Value Addition: Domestic value addition shall be computed as below (A divided by B):
- A: Net sales turnover minus value of non-originating material and services used in manufacturing of eligible product
- B: Net sales turnover
Can an applicant avail both PLI and an alternative incentive from the Government?

Eligibility under the PLI Scheme shall not affect eligibility under any other scheme and vice versa.
If a company is manufacturing two or more items, does the company have to fulfil qualification and eligibility criteria for each of the items individually under the PLI scheme?

An applicant can apply for more than one eligible product. However, a separate application along with the application fee is required to be submitted for each eligible product.

Scheme 2

Bulk Drug Parks Scheme

Overview

The scheme on Promotion of Bulk Drug Parks for financing Common Infrastructure Facilities in 3 Bulk Drug Parks with financial implication of INR 3,000 crore for 2020-2021. Assistance under the scheme will be admissible for such facilities by State Government in Bulk Drug Parks. Parks will have common facilities such as solvent recovery plant, distillation plant, power and steam units, common effluent treatment plant etc.

Highlights

Incentives

INR 3000 Crores for providing financial assistance for construction of Common Infrastructure Facilities in 3 Bulk Drug Parks with a maximum limit of INR 1000 Crore.
Tenure of the Scheme

The scheme shall be operational during the period FY 2020-2021 to 2024-2025.
Proposer

The proposer shall be a State Government who can make only one proposal of Bulk Drug Park under the Scheme having a minimum area of 1000 acres. For North Eastern and Hilly States the minimum area is 700 acres.

Infrastructure facilities

Common Facilities under the sub-scheme will consist of the creation of tangible assets as Common Facility Centres (CFCs). The capacities of the respective facilities will be commensurate to the number of manufacturing units in the park. Some of the indicative Common facilities are available here.

― State Implementing Agency (SIA)

SIA shall be a legal entity (with minimum 51% equity shareholding of State Government in the paid-up capital of SIA) set up by the State Government for the purpose of implementing the Bulk Drug Park Project. The SIA shall be responsible for day to day management of Bulk Drug Park.

The SIA shall be responsible for:

Preparing the Detailed Project Report (DPR) covering the technical, financial, institutional, and operational aspects of the Common Infrastructure Facility project of the Bulk Drug Park.
Ensuring and making available balance amount of the Project Cost.
Obtaining all statutory approvals, clearances including all environmental clearances.
Providing single window system for various approvals and testing certificates.
Recruiting suitable professionals to ensure that the project is executed smoothly.
Implementing various interventions as outlined and approved in DPR.
Preparing event report at every stage, an ex-post activity chart with complete breakdown of activities, the original expected dates, and actual dates along with the flow of fund requirements as specified in DPR.
Furnishing regular progress reports of the project to DoP / PMA.

Role of State Government

Submission of Project Report
Providing encumbrances free land for the development of the Bulk Drug Park
Ensuring and making available balance amount of the Project Cost through budgetary and/ or other sources.
Obtaining all statutory approvals/ clearances including all environmental clearances.
Providing a single window system for various approvals and testing certificates.
Providing necessary infrastructure, such as access road, power, water supply, to the park.
Providing all project related clearances expeditiously.
Providing all clearances required by individual bulk drug units expeditiously.
Promoting the Bulk Drug Park at National & International level.
Provide necessary electricity supply lines and water supply lines with the necessary infrastructure, up to the project site.