Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment

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PLI FOR PHARMACEUTICALS

Cabinet approves Production Linked Incentive Scheme for Pharmaceuticals.

Important points:

The union cabinet has approved the Production Linked Incentive (PLI) Scheme for Pharmaceuticals for the period 2020-21 to 2028-29.

Background:

The Indian pharmaceutical industry is the 3rd-largest in the world by volume and is worth USD 40 billion in terms of value.
The country contributes 3.5% of total drugs and medicines exported globally.
India exports pharmaceuticals to more than 200 countries and territories including highly regulated markets such as the USA, the UK, the European Union, Canada, etc.
At present, low value generic drugs account for the major component of Indian exports, while a large proportion of the domestic demand for patented drugs is met through imports.
This is because the Indian pharmaceutical sector lacks in high value production along with the necessary pharma R&D.
In order to incentivize the global and domestic players to enhance investment and production in diversified product categories, a well-designed and suitably targeted intervention is required to incentivise specific high value goods such as bio pharmaceuticals, complex generic drugs, patented drugs or drugs nearing patent expiry and cell based or gene therapy products, etc.

Objectives of the scheme:

To enhance India’s manufacturing capabilities by increasing investment and production in the sector and contributing to product diversification to high value goods in the pharmaceutical sector.
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.

Salient features of the PLI Scheme for Pharmaceuticals:

Production-Linked Incentive or PLI scheme is a scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units.
The pharmaceutical goods manufacturers registered in India will be classified according to their Global Manufacturing Revenue (GMR) into three groups to decide the quantum of their incentive allocation.

The three groups or categories are:

Group A: Applicants having GMR (FY 2019-20) of pharmaceutical goods more than or equal to Rs 5,000 crore.
Group B: Applicants having GMR (FY 2019-20) of pharmaceutical goods between

Rs 500 (inclusive) crore and Rs 5,000 crore.

Rs 500 crore. A sub-group for MSME industry will be made within this group, given their specific challenges and circumstances.

The incentive allocation among the Target Groups is as follows:

 Group A: Rs.11000 crore

 Group B: Rs.2250 crore

 Group C: Rs.1750 crore

Financial Year 2019-20 shall be treated as the base year for computation of incremental sales of manufactured goods.
Rate of incentive will be 10% (of incremental sales value) for Category 1 and Category 2 products for first four years, 8% for the fifth year and 6% for the sixth year of production under the scheme.
Rate of incentive will be 5% (of incremental sales value) for Category 3 products for first four years, 4% for the fifth year and 3% for the sixth year of production under the scheme.

Significance:

The Scheme will benefit domestic manufacturers, help in creating employment and is expected to contribute to the availability of wider range of affordable medicines for consumers.
The scheme is expected to promote the production of high value products in the country and increase the value addition in exports.
It is expected to promote innovation for development of complex and high-tech products including products of emerging therapies and in-vitro Diagnostic Devices as also self-reliance in important drugs.
It is also expected to improve accessibility and affordability of medical products including orphan drugs to the Indian population.
The Scheme is also expected to bring in investment of Rs.15,000 crore in the pharmaceutical sector.

SOURCE: THE ECONOMIC TIMES

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