Bulk drugs SMEs raise concern about Central Government giving only 11% share to MSMEs in second PLI scheme

Domestic pharmaceutical Small And Medium Enterprises (SMEs) which manufacture bulk drugs or Active Pharmaceutical Ingredients (APIs) have raised concern that Central Government has given more than 71% share to top few companies and only 11% share to the SMEs in the second production linked incentive (PLI) scheme aimed at giving boost to the domestic pharmaceutical industry.

There are around 7000 pharma SMEs in the country today.

Another concern raised is that in the PLI second scheme using terminology of foreign multinational companies (MNCs) to participate is objectionable because Chinese companies may also participate to set up plants in India to compete with the Indian pharmaceutical companies.

The Union cabinet approved the second PLI second scheme in June 2021 to boost domestic pharmaceutical sector for financial years 2020-21 to 2028-29. About Rs. 15,000 crore worth of incentives is envisaged to be provided under the scheme, with total incremental sales worth Rs. 2.94 trillion and incremental exports of Rs. 1.96 trillion expected during the six years.

Earlier in July 21, 2020, Department of Pharmaceuticals (DoP) had notified Rs. 3,000 crore bulk drug parks promotion scheme and Rs. 6,940 crore PLI scheme for promotion of domestic manufacturing of critical Key Starting Materials (KSMs)/ Drug Intermediates (DIs) and APIs in India.

According to B R Sikri, Vice President, Bulk Drugs Manufacturers Association of India (BDMAI), “There are certain bottlenecks in these two schemes which, unless and until are seriously deliberated with the industry, may end up with big setbacks at a later date. PLI- I Scheme comprises two categories i.e. chemicals synthesis category and fermentation category. While the chemicals synthesis category was more or less accepted by the industry as per government expectation but fermentation category following are the reservations observed by the industry, like less incentive offered by the Government. Secondly, availability of technology is a big concern. Power availability and tariff of power are other areas of concern. There are hardly 7 to 8 top companies who are capable of setting up fermentation categories of products in India today.”

“The budget allocated to SMEs also is very miniscule with only Rs 1600 Crore in the PLI-I scheme,” according to an industry official.

APIs such as valsartan, losartan, levofloxacin, sulfadiazine, ciprofloxacin, and ofloxacin among others, will be manufactured under the PLI –I scheme.

Government had launched first PLI scheme for promotion of domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four different Target Segments (in two fermentation based – at least 90% and in the two chemical synthesis based – at least 70%) for 41 products with a total outlay of Rs. 6,940 crore for the period 2020-21 to 2029-30.

Domestic pharmaceutical companies have gradually stopped manufacturing many of the APIs and started importing APIs, which is a cheaper option with increased profit margins on drugs. With availability of cheaper versions of API from China, the Indian pharma industry heavily depends upon China for around 68% of the API and DI.