PLI Scheme for Promotion of Domestic Manufacturing of critical DIs and APIs

By Sudheer Kumar K|Updated : June 1st, 2021

The Department of Pharmaceuticals has given approvals under Production Linked Incentive (PLI) Scheme for Promotion of Domestic Manufacturing of critical Key Starting Materials (KSMs)/ Drug Intermediates and Active Pharmaceutical Ingredients (APIs).

About the Production Linked Incentive (PLI) Scheme for Drug Intermediates & APIs

  • The Department of Pharmaceuticals has recently launched the PLI scheme with an intent to attain self-reliance and reduce import dependence in critical Bulk Drugs - Key Starting Materials (KSMs)/ Drug Intermediates and Active Pharmaceutical Ingredients (APIs).

  • Union Government to promote domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four different Target Segments with a total outlay of Rs.6,940 cr. for the period 2020-21 to 2029-30.

  • Setting up of these plants will make the country self-reliant to a large extent in respect of these Bulk drugs. The Government will disburse the production linked incentive up to Rs.6,000 cr over the next six years.

India is the third largest pharmaceutical industry in the world by volume. But the industry is largely dependent on other countries, particularly China, for import of APIs, DIs and KSMs.

What is an API?

WHO defined Active Pharmaceutical Ingredient (API) as "any substance or combination of substances used in a finished pharmaceutical product (FPP), intended to furnish pharmacological activity or to otherwise have direct effect in the diagnosis, cure, mitigation, treatment or prevention of disease, or to have direct effect in restoring, correcting or modifying physiological functions in human beings."

Generally, a drug is made up of two key ingredients:

  1. chemically active APIs and
  2. chemically inactive, excipients, which is a substance that delivers the effect of APIs to one’s system.

An API is a chemical compound, which is the most important raw material to produce a finished drug. In medicine, API produces the intended effects to cure the disease. For example, Paracetamol is the API for Crocin and it is the API paracetamol that gives relief from body ache and fever. APIs are also called Bulk Drugs.

There are two types of drugs:

  • Fixed-dose combination drugs, which use multiple APIs
  • Single-dose drugs like Crocin that use just one API

What are KSMs and DIs?

APIs are prepared from multiple reactions involving chemicals and solvents. The primary chemical or the basic raw material which undergoes reactions to form an API is called the key starting material, or KSM. Chemical compounds formed during the intermediate stages during these reactions are called drug intermediates or DIs.

APIs Manufacturing Industry in India

India was self-reliant in manufacturing APIs during early 90s. However, later, China has achieved high economies of scale and captured the Indian market with cheaper API products. China created a low-cost API manufacturing industry, which was backed by the low cost of capital followed by aggressive government funding models, tax incentives. China's cost of operation is one-fourth of India’s cost.

Even the cost of finance in China is competitive i.e. 6-7 per cent against 13-14 per cent in India. Eventually Indian pharma companies over the years has stopped manufacturing APIs due to meagre profit margins and non-lucrative industry.

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