India bulks up its drugs PLI scheme in renewed pushback against Chinese imports
India's pharma sector is at a turning point as the government seeks to strengthen local manufacturing through an upgraded drugs PLI scheme. With a growing market projected to reach $22 billion by 2030, the push for self-sufficiency in bulk drugs that go into manufacturing medicines is critical.
New Delhi: India is looking to give a significant boost to its production-linked incentives for drug manufacturing, particularly in terms of its ambition to reduce the domestic pharmaceutical industry’s dependence on China for its raw materials.
The upgraded PLI scheme will include more molecules used in manufacturing key starting materials (KSMs), drug intermediates, and active pharmaceutical ingredients (APIs), according to a communication issued on 14 May by the department of pharmaceuticals, which Mint has reviewed.
Details such as allocation, capacity, and incentive ceiling for the upgraded drug PLI scheme are being worked on, adepartment official said, declining to be identified.
Key starting materials and drug intermediates are chemical compounds used to synthesise APIs, or bulk drugs, which are the main components of a drug providing its intended medical effect.
India’s API industry is a crucial segment of its overall pharmaceutical sector, accounting for about 35% of the market, according to Invest India. But the domestic pharmaceutical industry is dependent on imports for 80% of its bulk drug requirement.
This is also because a significant chunk of the domestic production is meant for overseas markets.
- What: The government is upgrading its production-linked incentive (PLI) scheme to include more key starting materials (KSMs), drug intermediates, and active pharmaceutical ingredients (APIs), especially for critical drugs like antibiotics, antifungals, and diabetes medications.
- Why: While India has begun domestic production of key drug components like penicillin G and clavulanic acid, some projects remain unviable due to continued undercutting by Chinese suppliers and insufficient protection from price dumping.
- So what: The upgraded PLI scheme targets strategic growth in India’s API manufacturing capacity by prioritizing molecules with underutilized domestic capacity, supporting the country’s growing domestic pharmaceutical market while boosting economic resilience.
In 2024-25, India imported bulk drugs and advanced drug intermediates worth $3.5 billion, while exports accounted for nearly $3.5 billion, according to India’s commerce ministry. About 65% of the imports came from China.
In 2023-24, the exports were higher at $4.79 billion while the imports were at $4.56 billion.
For the upgraded PLI scheme, the department of pharmaceuticals has sought applications for manufacturing raw materials required to produce life-saving antibiotics, antifungal drugs, and medicines used in the treatment of diseases such as epilepsy and diabetes.
“As per the decision taken, conditions under the scheme such as allocation according to the available capacities, incentive ceiling in respect of products and limit of incentive upto production tenure i.e. upto FY2027-28, for chemical synthesis products and upto FY2028-29 for fermentation-based products, have to be complied with," the department of pharmaceuticals said in its notice.
The department of pharmaceutical’s secretary, Amit Agarwal, and its spokesperson did not reply to queries emailed on 1 June.
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‘Need protection from China’
The Central government launched PLI schemes in 2020 for domestic manufacturing of drugs with a financial outlay of ₹6,940 crore, chiefly to cut the industry’s reliance on China. The production tenure for those PLI schemes stretches from 2022-2023 to 2028-29.
Currently, the government has 14 PLI schemes in play for India’s pharmaceutical sector, including for medical devices, pharmaceuticals, and bulk drugs. According to the government, under the PLI scheme for bulk drugs, 48 projects have been selected, of which 34 have been commissioned for 25 bulk drugs.
The scheme has helped domestic pharma companies begin production of key drug ingredients such as penicillin G and clavulanic acid that are used in manufacturing antibiotics including amoxicillin.
“(But) there are certain drugs in the existing or previous PLI scheme for bulk drugs/APIs which are unviable even after considering incentives under PLI," said R.K. Agrawal, national president, Bulk Drugs Manufacturers Association of India.
“Industry is also not finding solution/safe guards to Chinese dumping of these products in future as the 10% incentive provided under the scheme will not be able to protect the industry. DoP (the department of pharmaceuticals) is trying to seek industry interest in the same products and providing one more opportunity," Agrawal said.
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A director at a company that participated in the existing PLI scheme for bulk drugs said that despite investing heavily in producing an important API, including establishing a manufacturing facility for it, the firm was going into losses.
“Right now, we are selling out products at a 30% loss. China has reduced the price of its raw materials or APIs by 40%, and people are buying from China even though products are available domestically," the director said, speaking on condition of anonymity.
“We made our representation to the government that we need protection from China. The government has now created a strategy where they are practically going to implement the minimum import price on China to defend the previous PLI scheme, the product for which we have won the PLI," the director added.
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A growing domestic industry
Given India’s growing lifestyle-related disease burden, the domestic pharma industry uses bulk drugs largely in manufacturing antibiotics to manage non-communicable diseases such as cardiovascular diseases, chronic respiratory diseases, and diabetes.
India’s API market is projected to reach $22 billion by 2030, growing at a compound annual growth rate of 8.3%, according to consulting firm Praxis Global Alliance.
Viranchi Shah, national spokesperson, Indian Drugs Manufacturer Association, said that under its upgraded PLI scheme, the government wants to cover molecules for which manufacturing capabilities need to be strengthened and where India’s capabilities are underutilized.
Pharmaceutical products such as neomycin, erythromycin thiocyanate, and gentamycin will be covered under the new PLI scheme, as per the department of pharmaceuticals’ notice.
India’s pharmaceutical industry is poised for significant growth, Shah said, adding that PLI schemes promoting domestic production of key APIs and KSMs had been “largely successful".
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“Last year, the export of API exceeded the import of API. Certain very critical ingredients, a precursor of paracetamol, para amino phenol (PAP), was manufactured in a very small quantity. When covid-19 struck in 2020, we (India) had only one plant and all the other requirements were imported. Today, we have three plants in India. So the import of PAP has considerably gone down, which results in a better supply chain for paracetamol," Shah said.
“Clavulanic acid was never produced in India but now (it is) being manufactured in India (and) used for antibiotics like augmentin. A very important molecule, Pen-g, used to be manufactured in India 25 years back, but slowly the industry vanished from India due to increasing capabilities in neighbouring countries. It is now being manufactured in India," he added.
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