New Delhi, Feb 19 (KNN) The government is considering the introduction of a new Production-Linked Incentive (PLI) scheme aimed at bolstering the pharmaceutical sector's production of vital chemicals essential for active pharmaceutical ingredients (APIs).

This initiative seeks to diminish Indian companies' reliance on China for these critical supplies, as per sources cited by Moneycontrol.

“The entire value chain of pharma is not covered under the current PLI due to which these input chemicals are still imported in bulk from China,” an insider familiar with the matter told Moneycontrol.

According to a report by rating agency CareEdge, India's dependency on Chinese pharmaceutical imports ranges from 55 per cent to 66 per cent and is anticipated to persist in the foreseeable future.

The potential implementation of the new PLI scheme is anticipated to occur after the formation of the new government, potentially as part of the forthcoming Union Budget.

Reports from Care Ratings illustrate a substantial increase in the importation of bulk drugs from China, with both value and volume witnessing significant growth rates over the years, growing 64 and 62 per cent in FY14, and by 71 and 75 per cent in FY23, respectively.

The source highlighted China's low unit costs for manufacturing these chemicals, leading Indian manufacturers to import them for API production despite environmental concerns.

“Consequently, the government may also look at modifying the current PLI scheme in pharmaceuticals to include these chemicals under its scope,” the source said.

An existing shortcoming of the pharmaceutical PLI scheme is its failure to cover the entire supply chain, prompting scrutiny from a senior government official speaking to Moneycontrol.

While the current scheme incentivises the local production of key starting materials, drug intermediates, and APIs, the prevailing market dynamics—characterised by reduced prices on chemicals imported from China—pose challenges for Indian manufacturers.

Relying extensively on a single country for crucial pharmaceutical ingredients poses inherent risks to India's pharmaceutical industry, as disruptions in the supply chain can result in shortages and production delays.

(KNN Bureau)