India to make Bulk Drug and High-end Medical Device Parks, to beat China and become self-reliant in drug and medical-equipment sector.

Domestic Pharmaceutical and medical equipment sector to get a boost? 

In a move to promote domestic production of critical API and High-end Medical devices, Modi Government on Monday announced setting up of three bulk drug and Medical Device parks and special incentives scheme to bulk drug manufacturers in the country. The total outlay of the incentives is around Rs 10,360 crores.

The idea behind the entire exercise is to make India cost-wise competitive in manufacturing of Active Pharmaceutical Ingredients (API) and high-end medical devices. Presently most of the API and medical devices are imported from China. This is despite the fact that India is a leading manufacturer of generic medicines in the world. In another scheme, the government has announced incentives of Rs 6940 crores to companies involved in domestic production of 53 bulk drugs. The government would give financial incentives to a maximum of 136 manufacturers selected under the scheme spread in over six years, the Ministry said. 

These schemes would make India not only self-reliant but make it capable of catering to the global demand for the selected bulk drugs and medical devices. “This is also a golden opportunity for the investors since incentivisation to industry and world-class infrastructure support would help in bringing down the cost of production significantly. These schemes along with the liberal FDI policy in these sectors and an effective corporate tax rate of about 17% would give a competitive edge to India in the selected products vis-à-vis other economies,” said Union Minister for Chemical and Fertilizer D V Sadananda Gowda while announcing the incentive schemes.

He said the Union Government would give a maximum 90% grant in aid states, which would be qualified for setting up the of the Park. While 90% grant in aid would be given to North Eastern and other hilly states, 70% grant would be given to other states, the Minister with a maximum cap of Rs 1,000 crore for each Park. The states have been asked to submit its report within 60 days, centre would take a final decision in another 30 days after the reports are submitted.

In another Production linked incentive schemes for manufacturing High-end Medical devices, the government intends to boost domestic manufacturing of medical devices in four target segments by giving financial incentives on sale to a maximum number of 28 selected applicants for a period of five years. Centre would give a financial incentive of 5 % of the sales of domestically manufactured medical devices

Government has set four target segments for medical devices, mainly Cancer care and   Radiotherapy medical devices,  Radiology and Imaging medical devices (both ionizing and non-ionizing   radiation products), Nuclear Imaging devices, Anesthetics and Cardio-Respiratory medical devices including catheters of Cardio Respiratory Category and Renal Care medical devices and aII Implant devices, the Minister said.

The Minister said India is often referred to as ‘the pharmacy of the world’ and it proved itself the world when it continued to export critical life-saving medicines during ongoing Covid-19 pandemic. But it is also a fact that despite these achievements, India is critically dependent on imports for basic raw materials, viz. Bulk Drugs (Key Starting Materials (KSMs)/ Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs)) that are used to produce some of the essential medicines. Similarly, in the medical devices sector, our country is dependent on imports for 86% of its requirements of medical devices. 

He said the Production Linked Incentive (PLI) schemes for promoting domestic manufacturing of KSMs, DIs and APIs and medical devices would go a long way to boost domestic manufacturing of 53 bulk drugs, on which India is critically dependent on imports. 

The list of 41 products contained in the scheme guidelines will enable domestic production of 53 bulk drugs. Financial incentives will be given to a maximum of 136 manufacturers selected under the scheme as a fixed percentage of their domestic sales of these 41 products manufactured locally with the required level of domestic value addition. 

The incentives would be subject to annual ceilings communicated in the approval letter. The incentives would be given for a period of 6 years. In the case of fermentation-based products, the rate of incentive is 20% for the first four years, 15% for the fifth year and 5% for the sixth year.

In the case of chemically synthesised products, the rate of incentive is 10% for all six years. The selected manufacturers shall have to complete committed investment above a threshold investment mandated for each product and achieve a prescribed minimum installed capacity before they are eligible to receive incentives. Threshold investment is Rs 400 crore for four fermentation-based products and Rs 50 crore for ten fermentation-based products. Similarly, threshold investment is Rs 50 crore for four chemically synthesised products, and Rs 20 crore for 23 chemically synthesised products. Minimum installed capacity to be achieved for each of the 41 products is prescribed in the guidelines. The incentives for fermentation-based products would be available from FY 2023-24 i.e. after a two year gestation period during which the selected applicant has to complete the committed investment and install the committed capacity. 

For chemically synthesised products the incentives would be available from FY 2022-23 i.e. after a gestation period of one year during which the selected applicant has to make the committed investment and install the committed capacity. Any company, partnership firm, proprietorship firm or an LLP registered in India and possessing a minimum net worth (including group companies) of 30% of the proposed investment is eligible to apply for incentives under the scheme. An applicant can apply for any number of products. 

The applicants will be selected on the basis of transparent composite evaluation criteria which include the annual production capacity committed by the applicant and the sale price of the product quoted by the applicant. Applicants quoting low sale price and higher production capacity will get higher marks in the evaluation.

The guidelines are available on the website of the Department of Pharmaceuticals. The salient features of the four schemes are:

The scheme is open for applications for a period of120 days from the date of issuance of guidelines and the approval will be given to the selected applicants within 90 days from the closure of the application window. Applications will be received only through an online portal. The total financial outlay of the scheme is Rs. 6,940 crore.

Scheme for promotion of Bulk Drug Parks: The scheme envisages the creation of 3 bulk drug parks in the country. The grant-in-aid will be 90% of the project cost in case of North-East and hilly States and 70% in the case of other States. Maximum grant-in-aid for one bulk drug park is limited to Rs.1000 crore. 

States will be selected through a challenging method. The States interested in setting up the parks will have to ensure assured 24*7 supply of electricity and water to the bulk drug units located in the park and offer competitive land lease rates to bulk drug units in the park. The location of the proposed park from environmental angle and logistics angle would be taken into account while selecting the States. 

The ease of doing business ranking of the state, incentive policies of the State applicable to the bulk drug industry, availability of technical manpower in the state, availability of pharmaceutical/chemical clusters in the state will also be factored in while selecting the States. The interested States will be scored and ranked on evaluation criteria, given in the guidelines, which captures the above parameters. The States getting top 3 ranks will be selected. The States have to submit their proposal within 60 days of the date of issuance of the guidelines. Selection will be done and in-principle approval will be given to three selected States within 30 days of the last date of submission of proposals.

 Thereafter, the 3 selected States will have to submit a Detailed Project Report (DPR) within 180 days of the in-principle approval based on which final approval will be given. The grant-in-aid will be released in four instalments. First three instalments will be 30% each and the last will be 10% of the grant-in-aid. The selected States will have to complete the parkas per the approved DPR within two years of the date of release of the first instalment of grant-in-aid. It is envisaged to have a single-window system in these parks for all regulatory approvals under one roof. The creation of a centre of excellence is also envisaged to enable an ecosystem for Research and Development. The total financial outlay of the scheme is Rs. 3,000 crore.

Production Linked Incentive (PLI) scheme for promoting domestic manufacturing of Medical Devices: The scheme intends to boost domestic manufacturing of medical devices in four target segments by giving financial incentives on sales to a maximum number of 28 selected applicants for a period of 5 years. A financial incentive will be given at a rate of 5% of the sales of domestically manufactured medical devices. The incentives would be subject to annual ceilings communicated in the approval letter the incentives would be available from FY 2021-22. Four target segments are:-

Cancer care / Radiotherapy medical devices

Radiology & Imaging medical devices (both ionizing & non-ionizing   radiation products) and Nuclear Imaging devices

Anaesthetics & Cardio-Respiratory medical devices including catheters of Cardio-Respiratory Category & Renal Care medical devices

AII Implants including implantable electronic devices

Any company registered in India and possessing a minimum net worth ( including group companies) of Rs.18 crore (30% of threshold investment of the first year) is eligible to apply for incentives under the scheme. The applicant can apply for multiple products within one target segment as well as multiple target segments. The selected applicants shall have to complete a threshold investment prescribed for each year and achieve a minimum prescribed sale for that year for them to be eligible to receive incentives. The application window is 120 days from the date of issuance of guidelines and the approval thereafter to the selected applicants will be accorded within 60 days from the date of closure of the application window. The applications will be received only through an online portal. The total financial outlay of the scheme is Rs.3,420 crore.

Ends.