PLI Scheme for IT Hardware and Pharmaceuticals

• 26 Feb 2021

Why in News

Recently, the Union Cabinet has cleared Production-Linked incentive (PLI) schemes for pharmaceuticals and IT hardware, including laptops, which would cost the government as much as Rs. 22,350 crore.

• Earlier, the government had announced the PLI scheme for medical devices, mobile phones and specified active pharmaceutical ingredients, with a proposed outlay of Rs. 51,311 crore.

Key Points

• PLI Scheme:
  
  • It aims to give companies incentives on incremental sales from products manufactured in domestic units.
  • It invites foreign companies to set units in India, however, it also aims to encourage local companies to set up or expand existing manufacturing units.

• IT Hardware Sector:
  
  • About:
    
    • The scheme, worth Rs. 7350 crore, will offer 1-4% cash incentives on net incremental sales (over base year 2019-20) for IT products manufactured in India.
    • The Target Segments include Laptops, Tablets, All-in-One PCs and Servers.
    • Duration: 4 years
  • Benefits:
    
    • India will be well positioned as a global hub for Electronics System Design and Manufacturing (ESDM) on account of integration with global value chains, thereby becoming a destination for IT Hardware exports.
    • Employment Generation potential of over 1,80,000 (direct and indirect) over 4 years.
    • Provide impetus to Domestic Value Addition for IT Hardware which is expected to rise to 20-25% by 2025.
• Pharmaceutical Sector:
  
  • About:
    
    • The Rs. 6,940-crore PLI scheme implemented in 2020 focuses on the critical bulk drugs, whereas this scheme is likely to focus on other types of bulk drugs.
    • It intends to give incentives between 2020-21 and 2028-29 (9 years).
    • Drug manufacturers applying for the scheme will have to be registered in India and will be placed into one of three categories based on their Global Manufacturing Revenue (GMR).
  • Categories of Drugs Targeted by the Scheme:
    
    • First Category:
      
      • It includes biopharmaceuticals, complex generics, patented and orphan drugs, often expensive for which India relies a lot on multinational drug makers.
    • Second Category:
      
      • It comprises Active Pharmaceutical Ingredients (APIs), Key Starting Materials (KSMs) and Drug Intermediates (DIs).
    • Third Category:
      
      • It includes other critical repurposed, auto-immune, anti-cancer, anti-diabetic, anti-retroviral, anti-infective and cardiovascular drugs as well as in-vitro diagnostic devices and drugs not manufactured in India.
  • Incentives:
    
    • For First and Second Category:
      
      • 10% of incremental sales value for the first four year of the scheme, followed by 8% for the fifth year and 6% for the sixth year of production under the scheme.
    • For Third Category:
      
      • 5% of incremental sales value for the first four years, 4% for the fifth year and 3% for the sixth year.
  • Benefits of PLI in Pharmaceuticals:
    
    • Reduced Dependency on China:
      
      • India’s capabilities in APIs have reduced over the years, mostly due to cheaper alternatives from China.
      • The pharmaceutical industry here is currently dependent on the bordering country for nearly 70% of the bulk drugs it imports.
    • Enhance Exports:
      
      • The Indian pharmaceutical industry is the third-largest globally in terms of the volume term of production and is worth USD 40 billion in value.
      • The country contributes 3.5% of total drugs and medicines exported globally.

Source: IE