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Centre launches schemes, guidelines to set up bulk drugs, medical devices parks

Tuesday, 28 Jul 2020
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Union Minister for Chemicals and Fertilizers D V Sadananda Gowda launched four schemes of the Department of Pharmaceuticals for promotion of domestic manufacturing of bulk drugs and medical devices parks in the country. The Centre has approved four schemes, two each for bulk drugs and medical devices parks. 
 
The Production Linked Incentive (PLI) schemes for promoting domestic manufacturing of KSMs, DIs and APIs and medical devices will go a long way to boost domestic manufacturing of 53 bulk drugs on which India is dependent on imports. 
 
The list of 41 products contained in the scheme guidelines will enable domestic production of 53 bulk drugs. The 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 required level of domestic value addition. 
 
The incentives will be subject to annual ceilings communicated in the approval letter. The incentives will be given for a period of six years. In case of fermentation-based products, the rate of incentive is 20 percent for first four years, 15 percent for the fifth year and five percent for the sixth year. In case of chemically synthesised products, the rate of incentive is 10 percent for all six years. 
 
The selected manufacturers will 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. 
 
The threshold investment is Rs 400 crore for four fermentation-based products and Rs 50 crore for 10 fermentation-based products. The 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 FY23-24 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 will be available from FY22-23 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 a LLP registered in India and possessing a minimum net worth (including group companies) of 30 percent of proposed investment is eligible to apply for incentives under the scheme. Moreover, 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. The applicants quoting low sale price and higher production capacity will get higher marks in the evaluation. 
 
The salient features of the four schemes are -- the scheme is open for applications for a period of 120 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 application window. The applications will be received only through an online portal and the total financial outlay of the scheme is Rs 6,940 crore. 
 
The scheme for promotion of Bulk Drug Parks envisages creation of three bulk drug parks in the country. The grant-in-aid will be 90 percent of the project cost in case of North-East and hilly states and 70 percent in case of other states. The maximum grant-in-aid for one bulk drug park is limited to Rs 1,000 crore. 
 
The states will be selected through a challenge method and the state interested in setting up the parks will have to ensure assured 24x7 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 state. The states getting top three ranks will be selected. 
 
The states have to submit their proposal within 60 days of the date of issuance of the guidelines. The selection will be done and in-principle approval will be given to three selected states within 30 days of last date of submission of proposals. 
 
The 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 installments. 
 
The first three installments will be 30 percent each and the last one will be 10 percent of the grant-in-aid. The states will have to complete the park as per the approved DPR within two years of date of release of first installment of grant-in-aid. The creation of a centre of excellence is also envisaged to enable an ecosystem for R&D. The total financial outlay of the scheme is Rs 3,000 crore. 
 
The Production Linked Incentive (PLI) scheme for promoting domestic manufacturing of medical devices 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 five years. The financial incentive will be given at a rate of five percent 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 FY21-22. 
 
The four target segments are Cancer care/Radiotherapy medical devices; Radiology & Imaging medical devices (both ionizing & non-ionizing radiation products) and Nuclear imaging devices; Anesthetics & Cardio-Respiratory medical devices including catheters of Cardio Respiratory category & Renal Care medical devices; allimplants including implantable electronic devices. 
 
Any company registered in India and possessing a minimum net worth (including group companies) of Rs 18 crore (30 percent of threshold investment of 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 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 application window. The applications will be received only through an online portal. The total financial outlay of the scheme is Rs 3,420 crore. 
 
These schemes along with the liberal FDI policy in these sectors and an effective corporate tax rate of about 17 percent including surcharge and cess will give a competitive edge to India in the selected products vis-à-vis other economies.
 
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