PLI Scheme for Promoting Domestic Manufacturing of Medical Devices

Overview of the Medical Devices industry in India:

Large conglomerates and small and medium companies (SMEs) coexist in India's medical device industry, which is expanding at an extraordinary speed. In the recent decade, the healthcare and medical device industries have risen dramatically. In India, there is a substantial gap between existing demand and supply for medical equipment, which presents a substantial opportunity for device manufacture.
To promote the industry, the Indian Government has launched a number of programmes aimed at strengthening the medical devices sector, with a focus on research and development (R&D) and 100 percent FDI for medical devices. FDI inflows into the medical and surgical equipment sector totaled US$ 2.17 billion from April 2000 to September 2020.

Production Linked Incentive (PLI) Scheme for Promoting Domestic Manufacturing of Medical Devices:

Medical devices have been recognised as a priority sector for the flagship 'Make in India' programme, and the Indian government is dedicated to strengthening the manufacturing environment. India is Asia's fourth-largest market for medical devices. The Indian market is now heavily reliant on imports, though exports have recently increased. India's ambition of becoming a worldwide manufacturing base for medical equipment is being boosted by the "Atma Nirbhar" Bharat programme. The Production Linked Incentive Scheme (PLI) and the Promotion of Medical Device Parks Scheme, for example, are recent initiatives that demonstrate this. These programmes have been thoughtfully designed to encourage large-scale production and to provide the infrastructure necessary for the development of manufacturing clusters in India.

Due to a lack of adequate infrastructure, domestic supply chain and logistics, high cost of finance, insufficient availability of power, limited design capabilities, and a low focus on research and development and skill development, India's medical device sector has a significant cost of manufacturing disadvantage compared to competing economies. As a result, there was a need for a system to compensate for this manufacturing constraint in order to provide a level playing field for domestic medical device producers. The Indian government has announced a Production Linked Incentive Scheme for supporting domestic medical device manufacture, which was issued through an official gazette notification on July 27, 2020, to compensate for manufacturing limitations in certain categories of medical equipment.

The Scheme proposes a monetary incentive to encourage domestic manufacture and major investments in the medical device industry.

Key Highlights of the Scheme:

• Tenure: Tenure of the scheme is from FY 2020-21 to FY 2027-28
• Incentive: Incentive of 5% on incremental sales (over Base Year: FY 2019-20) of goods manufactured in India. Production Linked incentives of up to INR 3,420 Crore will be awarded in the scheme tenure.
• Target Segments: A broad range of product segments ranging from equipment, implants, and consumables.

Target Segments Eligible under PLI Scheme:

Medical Device Segment	Eligible Products
Cancer care / Radiotherapy	Brachytherapy Systems, Rotational Cobalt Machine, Radiotherapy Simulation Systems, Linear Accelerator (LINAC), Workstations- Radiotherapy Planning, Proton therapy system and other products in this target segment.
Radiology, Imaging and Nuclear Imaging Devices	CT Scan, MRI, Ultrasonography, X-ray equipment, mammography, C-arm, Cath-Lab, Positron Emission Tomography (PET) Systems, Single-photon emission tomography (SPECT), Cyclotrons and other products in this target segment.
Anaesthetics, Cardio-Respiratory and Renal Care	Needles-Anesthesia, Syringes-Anesthesia, Anesthesia workstation, Anesthesia Unit Gas Scavengers, Anesthesia Kits, Masks —Anesthesia, Anesthesia Unit Vaporizers, Anesthesia Unit Ventilators, Automated external defibrillators (AEDs), Dialyzer, Dialysis Machine, Peritoneal dialysis kits, Biopsy Kits- Renal, Dialyser reprocessing I Lithotripters-Extracorporeal —Renal and other products in this target segment.
All Implants	Cochlear Implants, Hip Implants, Knee Implants, Spinal and neuro-surgical implants, Urogynecologic Surgical Mesh Implants, Hernia Surgical Mesh Implants, Cerebral Spinal Fluid (CSF) Shunt Systems, Implanted Pacemakers, insulin pump, implanted neuro-stimulated device like Deep Brain Stimulator, Intraocular lenses, heart valves, stents and other products in this target segment.

The Technical Committee, constituted by the Department of Pharmaceuticals (DoP), will determine whether products not specifically specified in the table above are eligible for inclusion in the target segment.

Eligibility for Selection under this Scheme:

• Support under this Scheme would be offered to companies that are registered and manufacture target segments in India and have a net worth of more than Rs. 18 crores (including the applicant company and its group entities).
• The Scheme is only available to ‘greenfield projects’ that meet the guidelines. A greenfield project is one in which the applicant proposes to invest in a new production facility or a new plant inside the premises of an existing production facility as part of the programme. For the purposes of the Scheme, separate records must be kept for the new plant in the premises of an existing production facility.
• The applicant should not have been declared bankrupt or defaulted by any financial institution, nor should he or she have been accused of fraud.
• Eligibility under the PLI Scheme will not affect eligibility under any other scheme and vice-versa.
• Companies that satisfy the committed investment and minimum sales criterion will be eligible for investment distribution.

On October 29, 2020, the Department of Pharmaceuticals issued guidelines for Production Linked Incentive Scheme to promote domestic medical device manufacturing. This plan was open for applications until November 30, 2020. The department further asked eligible applicants to apply for the remaining slots in the scheme for all the target segments. All eligible applicants can apply online through this link. The last date of receipt of a complete application is 28th of July 2021.

What are the eligible Investments that will be calculated for the threshold Investment?

The investments that are eligible for the threshold investment calculation are:

• Expenditure incurred on new Plant, Machinery, Equipment and Associated Utilities: Eligible investment includes expenditure on a new plant, machinery, equipment and associated utilities as well as tools, dies, moulds, jigs, fixtures (including parts, accessories, components, and spares thereof) of the same, used in the design, manufacturing, assembly, testing, packaging or processing of any of manufactured goods covered under target segments.
• Expenditure incurred on new Research and Development (R&D): Eligible investment includes capital expenditure on R&D and product development related to Target Segments.
• Expenditure related to Transfer of Technology (ToT) Agreements: Eligible investment includes the cost of technology and initial technology purchase related to manufactured goods covered under Target Segments.
• Associated Utilities: Expenditure incurred on associated utilities as defined in the scheme guideline shall be considered as Investment for determining eligibility under the Scheme.

Process Flow Explained:

Application Process:

• The applicant must submit an online Application.
• A ‘Prima Facie Examination’ is conducted by the ‘Project Management Agency’ (PMA)
• Post examination, a letter of acknowledgement issued by the PMA. The letter of acknowledgement must be issued within 15 working days post completion of examination.
• The applications have to be finalised within 60 days from the date of closure of application window.
• Application Approval is done by the PMA based on the decision of ‘Empowered Committee’ (EC) which consists of members of DoP, chairman of Niti Aayog, Secretary of DoP, Secretary of Department of Health and Family Welfare, Secretary of Department of Commerce, Secretary of Department of Promotion of Industry and Trade, Secretary of Ministry of Environment, Director of General of Foreign Trade.
• Letter of Approval must be issued within 5 working days post receiving EC’S approval

Approval Acceptance:

• An applicant must furnish a bank guarantee and undertake Bank Guarantee within two weeks of gaining approval.
• The amount of the bank guarantee will be equal to 1% of the investment threshold for the first year, and it has to be provided in favour of the DoP.
• The Guarantee should last 365 days and will be rolled over until the first year's investment is made.

Disbursement Process:

• The Applicant must submit a ‘Claim for Disbursement of Incentive within 9 months from the end of the financial year to which the claim pertains.
• Verification of Claims and Application for Incentives is conducted by the PMA. Within 60 days of receiving a claim for disbursement, the PMA will process the claim and make relevant recommendations to the EC. The EC must consider and approve claims for disbursement of incentive.
• Disbursement of Funds is done by the PMA. After the applicant has completed all pre-disbursal processes and received approval from the EC, PMA will disburse funding.

Conclusion:

India's policymakers are trying to lessen the country's reliance on imported medical gadgets and technology. NITI Aayog is said to be working on a strategic road map for medical devices, comparable to the incentive package that provides large capital subsidies to the electronics industry. Medical device companies should work to establish India as a manufacturing hub for both domestic and international markets, pursue India-based innovation in tandem with indigenous manufacturing, collaborate across the Make in India and Innovate in India programmes, and produce Low to Medium technology products to serve underserved domestic markets.