A self-reliant Pharma Industry 

News: As pharmaceuticals industry is a key sector for the Atmanirbhar Bharat programme, Government introduced Production-Linked Incentive (PLI) scheme in this sector. A prime objective was to reduce import dependence on Active Pharmaceutical ingredients (APIs), Drug Intermediaries (DIs), and Key Starting Materials (KSM.

However, response to the scheme has not met expectations. 

What is PLI scheme, and what are its objectives? 

Read here 

What are the problems that have emerged regarding the application of scheme? 

Only 239 applications were received in two rounds from an industry which has over 3,000 firms. 

In spite of the two rounds of applications, no beneficiary was identified (or no application was received) in five products, which are all antibiotics. 

To realise the objective of import dependence, there is need for a broader strategy. 

What are the modifications required in PLI scheme to make it more effective? 

Price competency: Firms will invest in production in India only if they see a prospect of producing at prices cheaper than the cost of imports. Products from China are 35–40% cheaper than compared to indigenously produced products. So, any strategy aimed at achieving self-reliance should focus on achieving price competency in production. 

Technology: PLI scheme doesn’t have a technology component. Technology will help Indian producers overcoming some advantages of Chinese producers like competitive pricing and scale of operations. 

Old capacity: Scheme insists on new manufacturing facilities, which doesn’t allow firms which have idle older capacities to take advantage of the scheme. Many firms used to produce these products and have wound up production as cheaper imports began to flow from China. Permission to utilise existing but in-operational or underutilised facilities for production would elicit a better response.  

Involving MSMEs: The focus of the PLI Phase-I scheme is on large firms which have been historically interested in formulations and not Active pharmaceutical Ingredient (APIs). Apart from this, nearly three-fourth of the production of pharmaceuticals in India is by MSMEs. Therefore, it is important to include smaller firms. 

Involving Public sector enterprises: Out of the five products for which no application was received, four are APIs that are not used much by the industry. However they are of great significance for public health. Here, Government can task public sector enterprises (PSEs) should tasked for their production. 

Source: This post is based on the article “A self-reliant Pharma Industry” published in The Hindu on 8th Feb 2022.