India’s economy has been growing in double digits over the last few years and is expected to maintain this trajectory in the coming years as well. To provide an impetus to this growth story and ensure that manufacturing sector is also an equal contributor to the numbers, government of India announced the launching of the Production Linked Incentives [PLI] scheme for 13 focus sectors including pharmaceuticals sector.
Department of Pharmaceuticals (DoP) notified the PLI Scheme for Pharmaceuticals vide Gazette Notification No.31026/60/2020-Policy-DoP dated 3 March 2021. Guidelines for the scheme were issued on 1 June 2021 and were amended on 30 June 2021 with further amendment on 22 July 2021. The approved outlay of the scheme is INR 15000 crore which envisages to create global champions out of India who have the potential to grow in size and scale using cutting edge technology and thereby penetrate the global value chains. The scheme is open from 2 June 2021 to 15 August 2021 (Extended).
The applications are invited in three groups based on the Global Manufacturing Revenue (GMR) of FY 2019-20 of the applicants. A special carve out for MSMEs has been kept under the scheme. The applicants will be required to achieve minimum cumulative investment per year over a period of 5 years as prescribed under the scheme.
The investment could be under new plant and machinery, equipment and associated utilities, research and development, transfer of technology, product registration and expenditure incurred on building where plant and machinery are installed. No second hand/ used/ refurbished plant, machinery, equipment, utilities or research and development equipment shall be considered as eligible investment for the purpose of this Scheme. Investment made on or after 1 April 2020 will be considered as eligible investment under the scheme. The key conditions for each group are mentioned below:
| Group (total incentive) | Criteria | Number of applicants | Minimum investment | Minimum sale for claiming incentive in first year and subsequent year |
| Group A (INR 11,000 crore) | GMR => INR 5,000 in FY 2019-20 of pharmaceuticals and/or in-vitro medical devices | 11 with maximum 4 Foreign MNCs | INR 1,000 crores over 5 years | FY 22-23 – Threshold Turnover (TT) > INR 50 crores and minimum 7% growth over actual sales of previous FY |
| Group B (INR 2,250 crores) | GMR between INR 500 crore (inclusive) and INR 5,000 crores | 9 with maximum 3 foreign MNCs | INR 250 crores over 5 years | TT > INR 10 crores and minimum 7% growth over actual sales of previous FY |
| Group C (INR 1,750 crores) | GMR < INR 500 crores, including MSME | 35 (Minimum 20 MSME, subject to eligibility, 5 in in-vitro diagnostic devices, Balance for others) | INR 50 crores for non MSME For MSME, committed investment | TT for non MSME > INR 1 crore TT for MSME > INR 50 lacs and minimum 7% growth over actual sales of previous FY |
The eligible products have been categorized into three categories. The products covered under the scheme are formulations, biopharmaceuticals, active pharmaceutical ingredients, key starting material, drug intermediates, in-vitro diagnostic medical devices, etc. The category-1 and category-2 products attract 10% incentive and category-3 products attract 5% incentive on the incremental sales. Incremental sales of a product mean sales of that product in a year over and above the sales of that product in FY 2019-2020.
| Category 1 | Category 2 | Category 3 |
| 1. Bio-pharmaceuticals 2. Complex generic drugs 3. Patented drugs or drugs nearing patent expiry 4. Cell based or gene therapy drugs 5. Orphan drugs 6. Special empty capsules like HPMC, Pullulan, enteric etc. 7. Complex excipients 8. Phyto-pharmaceuticals 9. Other drugs as approved* | Active Pharmaceutical Ingredients / Key Starting Materials / Drug Intermediates except for the 41 eligible products already covered under the earlier PLI scheme | 1. Repurposed drugs 2. Auto immune drugs, anti-cancer drugs, anti-diabetic drugs, anti-infective drugs, cardiovascular drugs, psychotropic drugs and anti-retroviral drugs 3. in vitro diagnostic devices 4. Other drugs not manufactured in India 5. Other drugs as approved* |
Based on clearly laid out selection criteria given in the guidelines, a maximum of 55 applicants will be selected under the scheme. An applicant, through a single application, can apply for more than one product and the products applied by an applicant can be in any of the three categories. Also only one applicant, on behalf of group companies, shall be selected for the PLI scheme. Thereafter, the selected manufacturers will be able to receive production linked incentives based on incremental sales of pharmaceutical products for a period of 6 years.
Being the scheme is limited in terms of number of application, time line and eligibility conditions, its utmost important to have adequate assistance and support to deliberate and accordingly prepare the application and apply to obtain the approval.
About the Speaker:
Vineet has over 16 years of consulting experience in leadership role in Indirect tax including GST (around 13 years in Big 4) and working with leading players in diverse industry sectors including pharma. He has conducted sessions on various indirect tax topics (including GST) at Client’s place, Business Parks, and other forums (ASCI, FTAPCCI, JICA, KOTRA, EPC, ICAI, ICFAI, JITO, RGA and others).
https://www.linkedin.com/in/d-vineet-suman-a5a28729
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