Source: Business Standard, Feb 24, 2021
Mumbai/New Delhi: The Cabinet on Wednesday approved the Production Linked Incentive (PLI) Scheme worth Rs 15,000 for high value products in pharmaceuticals and about Rs 7,350 crore over four years for information technology hardware products.
The scheme for the pharma sector is expected to promote the production of high value products in the country and increase the value addition in exports. “Total incremental sales of Rs 2,94,000 crore (Rs 2.94 trillion) and total incremental exports of Rs 1,96,000 crore are estimated during six years from 2022-23 to 2027-28,” the government said. The scheme is expected to generate employment for both skilled and unskilled personnel, estimated at 20,000 direct and 80,000 indirect jobs as a result of growth in the sector.
The duration of the scheme for pharmaceuticals will be from FY21 to FY29.
It has sanctioned a 10 percent rate of incentive (of the incremental sales value) for two categories of pharmaceutical products (including biopharmaceuticals, complex generics, patented drugs nearing expiry, bulk drugs, intermediates among others) for the first four years, and 8 percent for the fifth year and 6 percent for the sixth year of production.
Similarly, a 5 percent incentive has been announced for repurposed drugs, cancer drugs, psychotropic and cardiovascular drugs etc, which goes down to 4 percent in the fifth year and 3 percent in the sixth year of production under the scheme.
For the scheme, the government has decided to divide the pharma firms into three groups based on their turnovers – Group A with global turnover of more than or equal to Rs 5,000 crore in FY20, Group B comprising companies with turnover between Rs 500 crore and Rs 5,000 crore and Group C with companies having a turnover of less than Rs 500 crore. A sub-category for micro-small and medium enterprises (MSMEs) will also be made under Group C.
IT Hardware sector
“Domestic value addition for IT hardware is expected to rise to 20-25 per cent by 2025 from the current 5-10 per cent due to the impetus provided by the Scheme,” the government said.
For the IT hardware sector, the scheme is expected to lead to total production of up to Rs 3,26,000 crore by five global and 10 national companies. The government also expects that out of the total production in the next four years, more than 75 per cent are expected to be exports of the order of Rs 2.45 trillion. The scheme will bring an additional investment in electronics manufacturing to the tune of Rs 2,700 crore, the Electronics and IT minister Ravi Shankar Prasad said on Wednesday, while introducing the scheme.
This is part of a previously planned expansion of PLI Scheme’s success in mobile devices and electronic components, medical devices and active pharmaceutical ingredients. The Cabinet had, in November, earmarked Rs 1.46 trillion for the incentives to be expanded into ten industries- automobiles and components, telecom equipment, laptops and PCs, air conditioners, electric batteries and so on.
Pharma majors like Lupin, Cipla, Dr Reddy’s Laboratories (DRL) have already shown interest to participate in the PLI scheme. Lupin, for example, has already applied under the bulk drug API scheme, and is looking to participate in the second round as well. Nilesh Gupta, managing director, Lupin told Business Standard recently, “The existing PLI scheme and the second version of the PLI scheme are powerful. We are looking at opportunities in the second round. We are looking at some of the products that fits in with our business and our overall plans. We have put in applications in the first PLI scheme too, but we can participate more meaningfully in the second round.” India’s third-largest pharma company Cipla has also indicated that it will be interested in participating in the second phase of the PLI scheme.
Kunal Chaudhary, Tax Partner, EY India said the expansion of the PLI scheme for IT Hardware will not only enable India to become an electronics manufacturing hub for the world, but also promises a substantial increase in value addition which will further the components ecosystems.
Spurred by the incentives provided under PLI last year, global brands such as Apple Inc, through its vendors, and Samsung lined up to participate in the scheme, which offered incentives of 4 to 6 per cent for five years on phones priced over $200, provided companies commit to incremental investment and production every year. It considers 2020 as the base year.
The government hopes to find similar success in other areas by providing similar incentives for boosting manufacturing of mobile devices.
Last year, the government had announced a Rs 6,940-crore PLI scheme to boost local manufacturing of bulk drugs (raw materials to make medicines), as India imports almost 70 per cent of its requirement of bulk drugs. Then in November, the Cabinet gave a nod to a Rs 15,000-crore scheme for pharmaceutical products and now the finer print of the scheme is out.
The idea is two-pronged — one reduces imports of high-value products like patented drugs, cell-based or gene therapy products, etc while the other boosts local manufacturing to a scale that India becomes a net exporter of these products. The government last week launched the PLI scheme for telecom and networking products, with an outlay of Rs 12,195 crore over five years.