Subsidies available within the Pharmaceutical Sector in India

India is one of the largest competitors in the world when it comes to the manufacture of pharmaceuticals and drugs in the world. The Indian pharmaceutical sector produces around 50 per cent of global need for several vaccines and it constitutes about 40 per cent of generic demand in the US and 25 per cent of all the drugs within the UK.

Keeping this in mind, the Government of India has incorporated several subsidies and schemes in order to boost progress and growth within this sector and help maintain India’s position as a global supplier of world-class pharmaceuticals. Some of these schemes and subsidies have been enumerated below:

SUBSIDIES

I. Production Linked Incentive Scheme for Promoting Domestic Manufacturing of Medical Devices

In order to reduce the increasing disability in manufacturing of medical devices in India along with other major manufacturing economies, a scheme known as the “Production Linked Incentive Scheme for Promoting Domestic Manufacturing of Medical Devices” has been approved by the Government of India on 20th March, 2020 for reducing this very disability and promoting the manufacture per unit. The domestic medical devices market in India is highly dependent over imports which contribute to more than 85% of the market. Furthermore, the medical devices manufacturing sector in India has been facing a huge lack of a level playing field with the competing economies.

Objectives and Benefits for pharmaceutical companies:

This Scheme intends to increase the domestic manufacturing per unit thereby attracting large investments within its Medical Devices Sector.

• Scope: The scheme gives financial incentives to the selected companies based on threshold investment and incremental sales of medical devices covered under the target segments provided.
• Quantum of Incentive: The scheme gives financial incentive  to the selected companies at the rate of 5% of incremental sales of the goods manufactured in India and covered under the specified target segments, for a period of five years that is, from FY 2021-22 to FY 2025-26.
• Target Segments: This Scheme is applicable only for target segments of medical devices.
• Applicability: This Scheme is applicable only for Greenfield projects.
• Eligibility:-
• All financial incentives under this scheme will be provided only to those companies engaged in the manufacture of goods covered under specified target segments in our country.
• The eligibility will be subject to the thresholds of investment and the incremental sale of manufactured goods which are covered under the target segments.
• The applicant should meet every threshold condition to be eligible for the disbursement of incentive.
• The eligibility under the Production Linked Incentive scheme must not affect the eligibility under any other Scheme and vice-versa.
• Incentive Per Company and the basis of computing: The incentive per company shall be applicable on the incremental sale of manufactured goods over the base year, subject to ceilings as provided by the Empowered Committee.  Further, the assessment of the threshold investment and the incremental sale of the manufactured goods shall be based on the reports give to the Departments, Ministries and Agencies and the Statutory Auditor certificate.
• The Approval and Disbursement Process
• The said application under the Scheme can only be made by a company registered in India.
• The initial application, complete in all aspects, shall be submitted within the application window.
• All eligible applications shall be appraised and considered for selection duly.
• The requisite incentives shall be released to the selected applicants who meet the required thresholds and whose disbursement claims are found to be legitimate.
• This support under the scheme shall be given for a period of five  years, which is from the financial years 2021-22 to FY 2025-26.

II. Production Linked Incentive (PLI) Scheme for promotion of domestic manufacturing of critical Key Starting Materials (KSMs)/ Drug Intermediates(DIs) and Active Pharmaceutical Ingredients (APIs) In India.

The constant and uninterrupted supply of drugs is essential for providing affordable healthcare to the people of India. Thus any disruption causing a delay in the supply of such drugs can become a huge impediment within the healthcare system of our country. Thus the following processes were thought to be necessary:

• A committee on drug security constituted by the Department of Pharmaceuticals collated the details of APIs imported in the country and identified 53 APIs for which the country is heavily dependent on imports. A list of such APIs is given in Annexure A.
• Drug security of the country is dependent upon our ability to ensure un-interrupted supply of quality bulk drugs and also our capacity to upscale their manufacturing to meet emergency situations. Self-reliance in manufacturing of drugs is, therefore, highly desirable.
• With a view to attain self-reliance and reduce import dependence in critical APIs, a scheme called “Production Linked Incentive (PLI) Scheme for promotion of domestic manufacturing of critical Key Starting Materials (KSMs)/ Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) In India” has been approved by the Government of India on 20th March, 2020.

Objectives and Benefits for the pharmaceutical companies:

The scheme intends to boost domestic manufacturing of identified KSMs, Drug Intermediates and APIs by attracting large investments in the sector and thereby reduce India’s import dependence in critical APIs.

• Scope: Under the Scheme, financial incentives shall be given based on sales made by selected manufacturers for 41 products. These 41 products, which cover all the identified 53 APIs, are listed in Annexure B.
• Quantum of Incentive: Financial incentive under the scheme shall be provided on sales of 41 identified products for six (06) years at the rates given below:For fermentation based products, incentive for FY 2023-24 to FY 2026-27 would be 20%, incentive for 2027-28 would be 15% and incentive for 2028-29 would be 5%.For chemical synthesis based products, incentive for FY 2022-23 to FY 2027-28 would be 10%. 5. Target Segments: Four Target Segments covering 41 products are listed in Annexure B. 6.
• Applicability: The scheme is applicable only for greenfield projects. Eligibility:-
  - Support under the scheme shall be provided only to manufacturers of critical KSMs/DIs and APIs registered in India.
  - Eligibility shall be subject to threshold investment in green field projects as given in Annexure C.
• Eligibility under the scheme shall not affect eligibility under any other scheme and viceversa. Basis of Computation: Assessment of threshold investment and sales of manufactured products shall be based on details furnished to the Departments/Ministries/Agencies and Statutory Auditor certificates. Approval and Disbursement Process:-

1. Application under the Scheme can be made by any manufacturer registered in India.
2. An initial application, complete in all aspects, shall have to be submitted within the application window.
3. Eligible applications will be appraised and considered for selection.
4. Incentive shall be released to selected applicants, meeting the required thresholds and whose disbursement claims are found to be in order.

III. Scheme for Promotion of Medical Device Parks

The industry for medical devices needs a lot of training to be provided in order to adapt to the newer technological requirements. As it is a huge investment to create testing and laboratory facilities, a scheme known as the “Promotion of Medical Device Parks” has been approved by the Government of India on 20th March 2020.

Objectives and Benefits for pharmaceutical companies:

The scheme was brought about with the goal of achieving the following parameters:

Provisions of easy access to standard testing and infrastructure facilities by creating world class common infrastructure facilities for increased competitiveness. This will result in significant reduction of the cost of producing medical devices leading to better availability and affordability of medical devices within the domestic market.

• Scope: Financial assistance under the Scheme will be provided for the creation of common infrastructure facilities in four Medical Device Parks proposed by State Governments and selected under the scheme.
• Financial Assistance: Financial assistance to a select few Medical Device Parks would be 70% of the project cost of the common infrastructure facilities. In case of North Eastern States and Hilly States (Himachal Pradesh, Uttarakhand, Union Territory of Jammu & Kashmir and Union Territory of Ladakh) financial assistance would be 90%. Maximum assistance under the scheme for one Medical Device Park would be limited to Rs. 100 Crore though.
• Common Infrastructure Facilities: The common facilities provided to individual medical device units in the Medical Device Park such as component testing centre, ESDM, PCB, sensors facility, electro-magnetic interference & electromagnetic compatibility centre, biomaterial/biocompatibility /accelerated aging testing centre, medical grade moulding/milling/injection moulding/machining/tooling centre, 3D designing and printing for medical grade products, sterilization/ETO/gamma centre, animal lab and toxicity testing centre, radiation testing centre etc.
• Financial Outlay and tenure:  The total financial outlay of the scheme is Rs. 400 crores and the scheme shall last from FY 2020-2021 to FY 2024-2025 respectively.

IV. Scheme for Promotion of Bulk Drug Parks

The future growth of the pharmaceutical industry is contingent upon India’s ability to ensure an uninterrupted supply of good quality bulk drugs and our capacity to upscale their manufacturing during emergency situations such as the current situation with the pandemic of Covid-19. Self-reliance in manufacturing of bulk drugs is, therefore essential. In order to significantly bring down the manufacturing cost of such bulk drugs and thus increase the competitiveness of the domestic bulk drug sector through the provision of easy access to standard testing & infrastructure facilities, a scheme called “Promotion of Bulk Drug Parks” has been provided for by the Government of India on 20th March 2020.

Objectives and Benefits for pharmaceutical companies:

• Promotion of bulk drug parks in the country for provision of easy access to world class common infrastructure facilities to bulk drug units located in the parks for bringing down manufacturing cost of bulk drugs and thereby making India self-reliant in bulk drugs through increased competitiveness within the industry.
• Helping this sector match the standards of environment at a reduced cost through innovative methods of common waste management systems.
• To exploit the benefits arising due to optimization of resources and economies of scale.
• Scope and Financial Assistance: The financial assistance under this Scheme shall be provided for creating a common infrastructure facility in three Bulk Drug Parks proposed by State Governments. Furthermore, the financial assistance to the selected Bulk Drug Park would be 70% of the project cost of common infrastructure facilities. In case of North Eastern States and Hilly States (Himachal Pradesh, Uttarakhand, Union Territory of Jammu & Kashmir and Union Territory of Ladakh) financial assistance would be 90% of the project cost. Maximum assistance under the scheme for one Bulk Drug Park would be limited to Rs. 1000 crores.
• Common Infrastructure Facilities: The common facilities provided to individual bulk drug units in the Bulk Drug Park such as central effluent treatment plant, solvent recovery and distillation plant, steam generation and distribution system, common cooling system and distribution network, common logistics facilities, advance laboratory testing centre, emergency response centre, centre of excellence etc.

V. Scheme for Development of Pharmaceuticals Industry

A scheme has been implemented by the Department of Pharmaceuticals for the development of the Pharmaceuticals Industry with the goal of ensuring drug security within the country through increased efficiency and competitiveness of the domestic pharmaceutical industry with the following sub-schemes:

• Assistance to Bulk Drug Industry for Common Facility Centre.
• Assistance to Medical Device Industry for Common Facility Centre.
• Pharmaceuticals Technology Upgradation Assistance Scheme (PTUAS).
• Assistance for Cluster Development.
• Pharmaceutical Promotion Development Scheme (PPDS).

The details of the sub-schemes are as follows:

Assistance to Bulk Drug Industry for Common Facility Centre: This scheme gives the required financial assistance for creating common facilities for any upcoming Bulk Drug Park promoted by State Governments or the State Corporations. The Scheme shall be implemented through a one-time grant-in-aid released to a State Implementing Agency (SIA). Some indicative activities under the common facilities include Effluent Treatment Plants, Captive Power Plants, Steam and Cooling systems, Incubation facilities, Common logistic facilities, Advance common testing Centre, Regulatory awareness facilitation Centre and Emergency Response Centre. A total of Rs. 200 Crore has been earmarked for the scheme and the maximum limit for the grant in aid would be Rs. 100 Crore per Bulk Drug Park CFC or 70% of the project cost of CFC whichever is less.

• Assistance to Medical Device Industry for Common Facility Centre: This scheme provides financial assistance for creating common facilities for upcoming Medical Device Parks promoted by the State Governments or the State Corporations. This Scheme would be implemented through a one-time grant-in-aid released to a State Implementing Agency (SIA).Some of the indicative activities under the Common facilities include Component Testing Centre, Electro-magnetic interference laboratory, Biomaterial / Biocompatibility testing centre, Medical grade low vacuum moulding, Cabinet moulding injection moulding centers, 2D designing and printing for medical grade products, Sterilization and Toxicity testing centre, Radiation testing centre, etc. A total of Rs. 100 Crore has been earmarked for the scheme and the maximum limit for the grant in aid would be Rs. 25 Crore per Medical Device Park CFC or 70% of the project cost of CFC whichever is less.
• Pharmaceuticals Technology Upgradation Assistance Scheme: The goal of this sub-scheme is to facilitate small and medium Pharmaceutical Enterprises (SMEs) for upgradation of their plant and machinery to World Health Organization (WHO)/Good Manufacturing Practices (GMP) standards in order to enable them to participate and compete in global markets. Aid in the form of interest subvention against sanctioned loan by any scheduled commercial bank or financial institution, both in the public and private sector shall be provided to 250 pharma SMEs of the proven track record. The Scheme is implemented through a Public Sector Financial Institution (PSFI) to be identified by the Government. A total of Rs. 144 Crore has been earmarked for the scheme. The upper limit of interest subvention on loans for technology upgradation is restricted to 6% per annum for a period of three years. The maximum loan eligible for this purpose will be Rs. 4 Crores.
• Assistance for Cluster Development: The scheme is an existing and approved scheme of the Department (Cluster Development Programme for Pharma Sector (CDP-PS)) now being subsumed under an umbrella scheme. This scheme provides financial aid for creating common facilities in any pharma clusters including Bulk Drug, Medical Device, Ayurvedic, Unani and Cosmetics Units. Some of the indicative activities under the Common facilities include Common Testing Facilities, Training Centre, R&D Centres, Effluent Treatment Plant and Common Logistics Centre. The Scheme shall be implemented on a Public Private Partnership (PPP) format through one time grant-in-aid to be released in various to a Special Purpose Vehicles (SPVs) set up for the purpose. A total of Rs. 30 Crore has been earmarked for the scheme including Rs. 10 Crore which was allocated in 2017-18 and the maximum limit for the grant in aid under this category would be Rs 20 Crore per cluster or 70% of the cost of project whichever is less.
• Pharmaceutical Promotion Development Scheme: This again is an existing and approved scheme of the Department which is now being subsumed under an umbrella scheme. The scheme aims at the promotion, development and export promotion within the Pharmaceutical sector through the extension of financial support for conducting seminars, conferences, exhibitions, mounting delegations for the promotion of exports as well as investments, conducting studies for facilitating growth, exports as well as critical issues affecting the Pharmaceutical industry. A total of Rs. 6 Crore has been earmarked for the scheme.

VI. Project Management Agency

This Scheme will be implemented only by a Nodal Agency. This Nodal Agency shall act as a Project Management Agency and shall be responsible for the provision of secretarial, managerial and implementational support and for carrying out other responsibilities. For carrying out activities related to the implementation of the scheme, PMA would, inter alia, be responsible for:

• The appraisal of applications and verifications for eligibility for all support under the Scheme.
• The examination of claims eligible for such disbursement of incentives under the Scheme,
• The compilation of all data regarding the progress and performance of the scheme including its threshold investment and incremental sale of its manufactured goods for all the selected companies.

CONCLUSION

India’s pharmaceutical industry is somewhat the backbone of Indian economy. It has also heavily contributed towards making India a hub for medical tourism. Considering the same in mind, the operational subsidies and schemes play a big incentive to the domestic and international pharmaceutical companies trading and working in India.

Considering the current COVID-19 pandemic and the status of healthcare system all around the globe, the primacy in pharma industry will also help India establish international supremecy.