The outbreak of COVID 19 has deeply impacted the Indian electronics and pharma markets as the country has depended on China for imports. The impact is seen in terms of importing mobile phones, and medical devices and critical material for manufacturing drugs. To overcome this dependence, the Union cabinet took key decision to enhance manufacturing in the country to not only meet the local demand but also be ready to export it. The government will set up dedicated parks for electronics and pharma companies for this purpose, and also with an eye to create jobs in the coming years.
Pharma sector
The cabinet has approved four schemes with an incentive outlay of Rs 9,940 crores and Rs 3,820 crores for bulk drugs and medical devices respectively, to boost their domestic production and for promotion of Make in India. This with an aim to boost local manufacturing of medical devices and generic drugs to reduce dependence on neighbouring countries especially China, as imports have been hit due to corona virus.
The cabinet decision has come in the form of approval to set up three bulk drug parks at the cost of Rs 3,000 crore in next five years, and also to give financial incentive to drug manufacturers who would invest and set up plants to manufacture active pharmaceutical ingredients (API) which are the raw material to manufacture medicines.
India had to depend on China to fulfill its demands for raw material, which had been impacted with the outbreak of COVID 19 in Wuhan.
These bulk drug parks will have common facilities such as solvent recovery plant, distillation plant, power & steam units, common effluent treatment plant so that all material necessary to manufacture drugs are available at the same point. The government of India will give grants-in-aid to the states with a maximum limit of Rs 1,000 crore per park.
“The Indian pharmaceutical industry is the 3rd largest in the world by volume. Despite this achievement, India is significantly dependent on import of basic raw materials, that are used to produce medicines. In some specific bulk drugs the import dependence is 80 to 100 per cent,” the cabinet note said.
With the outbreak of COVID 19, there are apprehensions that continuous supply of drugs is impacted. In order to remove dependence on other countries, these drugs parks are being developed.
For drug parks to be successful, the government is dolling out incentives to drug companies to set up plants. The cabinet approved production linked incentive (PLI) scheme for promotion of domestic manufacturing of critical drug intermediates and APIs in the country with financial implications of Rs 6,940 crore for next eight years. Financial incentive will be given to eligible manufacturers of identified 53 critical bulk drugs on their incremental sales over the base year (2019-20) for a period of 6 years.
The PLI scheme intends to boost domestic manufacturing of critical drug intermediates and APIs by attracting large investments in the sector to ensure their sustainable domestic supply and thereby reduce India's import dependence on other countries for critical drug intermediates and APIs. It will lead to expected incremental sales of Rs 46,400 crore and significant additional employment generation over 8 years, officials said.
In another scheme to boost production of medical device, similar parks will be set up for them. In all, four such parks will be developed. The target is to provide financial assistance for common infrastructure facilities for four medical device parks and incentive will be given to companies to manufacture these devices locally. The primary focus will be on manufacturing devices like MRI machines, X-ray machines, machines used in treatment of cancer, radiology and imaging medical devices for anesthetics and cardio-respiratory needs, implants including implantable electronic devices like Cochlear implants and pacemakers.
“PM Modi doesn't believe in tokenism but totality,” said minister of state for chemicals and fertilizers Mansukh Mandaviya.
Electronics Sector
The cabinet approved the Production Incentive Scheme (PLI) for large scale electronics manufacturing firms to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components.
The proposed scheme is likely to benefit 5-6 major global players and a few domestic champions, in the field of mobile manufacturing and specified electronics components and bring in large scale electronics manufacturing in India.
“The production of mobile phones in the country has gone up significantly from around Rs 18,900 crore in 2014-15 to Rs 1,70,000 crore in 2018-19 and the domestic demand is almost completely being met out of domestic production. By integrating 'Assemble in India for the world' into 'Make in India', India can significantly increase manufacturing output,” officials said.
Under this scheme, incentives to the tune of Rs 40,995 crore will be given.
“The scheme has a direct employment generation potential of over 2,00,000 jobs over 5 years. However, it is expected that the scheme would lead to large scale electronics manufacturing in the country and open tremendous employment opportunities. Indirect employment will be about three times of direct employment as per industry estimates. Thus, total employment potential of the scheme is approximately 8,00,000,” Communications and Electronics and Information Technology Minister Ravi Shankar Prasad said.
In the second scheme approved for the electronics sector, the government has approved financial assistance to set up electronics manufacturing clusters for all facilities and space will be provided to set up companies. The total outlay of the proposed EMC 2.0 Scheme is Rs. 3,762.25 crore.