The Production Linked Incentive 2.0 – Pharmaceuticals
The Indian pharmaceutical industry has been a key sector not only for India but the world, as it grapples with the COVID-19 pandemic. Popularly known as the 'Pharmacy of the world' India has reflected this title through its contribution to exports of critical drugs, vaccines, and medical devices at a global scale. India supplied around 45 tons and 400 million tablets of hydroxychloroquine to around 114 countries globally along with Paracetamol supplies of around 96 million tablets along with supplies of other essential materials to ~57 countries, while PPE production capacity revamped to half-million kits every day from virtually nil earlier of which over 20 million were exported.
To enable the country to serve the growing number of domestic cases and build resilience in the longer term whilst maintaining affordability, as well as to grow capacities to cater to global demand, in November 2020, the Union Cabinet gave its approval to introduce a new Production Linked Incentive (PLI) Schemes for 10 sectors. This also included the Pharmaceuticals sector and thus, the Production Linked Incentive Scheme 2.0 for Pharmaceuticals was notified on 03 March 2021 by the Ministry of Chemicals and Fertilizers.
The Scheme is approved from FY 2020-21 to 2028-29, with a total financial outlay of INR 15,000 Cr (Over $2 bn). Three broad categories of products are covered, Category A, B and ranging from bulk drugs to Biopharmaceuticals, Complex generic drugs, Patented drugs or drugs nearing patent expiry to name a few.
Manufacturers of pharmaceutical goods registered in India will be grouped based on their Global Manufacturing Revenue (GMR) to ensure wider applicability of the scheme across the pharmaceutical industry, and the incentive will be allocated corresponding to group category (Group A, B, C). The total outlay to be allocated is as follows*:
- For Group A: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods more than or equal to INR 5,000 crore ($684.31 mn) - An incentive of INR 11,000 crore ($1,505.48 mn)
- For Group B: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods between INR 500 (inclusive) crore ($68.43 mn) and INR 5,000 crore. ($684.31 mn) - An incentive of INR 2,250 crore ($307.94 mn)
- For Group C: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods less than INR 500 crore ($68.43 mn) Within this group, a sub-group for MSME industry will be made given their specific challenges and circumstances- An incentive of INR 1,750 crore ($239.509 mn)
The scheme is envisaged to promote the production of high-value products in the country as well as improve accessibility and affordability to the Indian population while boosting the resilience of India’s supply chains to external shocks. One of the further objectives of the scheme is to create global champions out of India who have the potential to grow in size and scale using cutting-edge technology and thereby penetrate the global value chains and thus enable India on its journey of “Atmanirbhar Bharat” or India to the world.
Read more for details on the category of goods covered, rate of incentive, and eligibility.
* The INR-$ exchange rate used is the RBI Reference Rate as of 03/03/2021 – date of Scheme notification