The Indian Union Cabinet recently approved Production-Linked Incentive (PLI) schemes for the technology and pharmaceutical sectors. This move will see the government investing an estimated Rs. 22,350 crore into these vital industries. Previously, the government enlisted medical devices, mobile phones, and specified active pharmaceutical ingredients in the PLI initiative, bringing the proposed total outlay to Rs. 51,311 crore.
Understanding the PLI Scheme
Aiming to stimulate growth, the PLI scheme offers firms incentives based on incremental sales from products made domestically. The strategic plan also welcomes foreign companies to establish operations in India, while encouraging local enterprises to either start up or enlarge their current manufacturing capacity.
The IT Hardware Sector and PLI
The technology hardware sector is set to receive a significant boost from the scheme, with Rs. 7350 crore allocated to support it. Companies will receive 1-4% cash benefits on net incremental sales for products manufactured in India. The targeted segments include Laptops, Tablets, All-in-One PCs, and Servers over a four-year period.
This initiative sets India up to be a global Electronic System Design and Manufacturing (ESDM) hub, following successful integration into worldwide value chains. Such a position would make India a go-to destination for IT hardware exports. Other benefits include a sizable potential for employment generation, with over 1,80,000 direct and indirect jobs expected over the scheme’s duration. A further effect will be a push for domestic value addition for IT hardware, projected to grow to 20-25% by 2025.
Pharmaceuticals and the PLI Scheme
In the realm of pharmaceuticals, the Rs. 6,940-crore PLI scheme, implemented in 2020, predominantly focused on critical bulk drugs. However, this revised scheme aims to expand its scope to cover other types of bulk drugs. The scheme runs from 2020-21 to 2028-29 (9 years), and targets drug manufacturers registered in India, categorizing them based on their Global Manufacturing Revenue (GMR).
The Categories of Drugs in the Scheme
The scheme has three categories. The first category comprises biopharmaceuticals, complex generics, patented and orphan drugs. The second category focuses on Active Pharmaceutical Ingredients (APIs), Key Starting Materials (KSMs), and Drug Intermediates (DIs). The third category includes repurposed, auto-immune, anti-cancer, anti-diabetic, anti-retroviral, anti-infective, cardiovascular drugs, and in-vitro diagnostic devices and drugs not manufactured in India.
Incentive Structure
Incentives for the first and second categories are 10% of incremental sales for the first four years, dropping to 8% in the fifth and 6% in the sixth year. The third category, however, receives a 5% benefit for the first four years, reducing to 4% in the fifth year and 3% in the sixth year.
PLI Benefits for Pharmaceuticals
The PLI scheme for pharmaceuticals offers a solution to India’s dependence on China for nearly 70% of its bulk drug imports. This dependence is due, in large part, to more cost-effective alternatives from China. The scheme also provides an export boost. The Indian pharmaceutical industry is the third-largest globally in volume production terms and stands at a value of USD 40 billion. Overall, India contributes 3.5% of total global exports in drugs and medicines.
