InvestorQ : How do you see the recent incentives given by Modi government for pharma sector?
Dawn Cherian made post

How do you see the recent incentives given by Modi government for pharma sector?

Answer
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Dilmini Mercia answered.
1 month ago


The Indian government has given a number of incentives to boost domestic manufacturing of active pharmaceutical ingredients (APIs) with a view to improving the level of backward integration among pharma companies and reduce the dependence on China.

India still depends heavily on imports for APIs and KSMs and this has become a problem after the pandemic and especially after the China border stand-off. These incentives are aimed at avoiding supply disruptions and also being atma nirbhar.

In fact, the irony is that India's reliance on API imports has risen over the last few years due to the higher cost of domestic production. In some cases, China almost has a 30% cost advantage in costs. In cases like penicillin and ciproflaxin, the dependence is almost 90%.

To curb this tendency, Indian government has announced production-linked incentives worth Rs.10,000 crore. This will subsidize the higher cost of domestic production compared to imports and also make funding easily available.

According to the PLI, most Indian companies will not have to make large outlays to participate under the incentive schemes. This will ensure limited impact on financial leverage and credit standing, but will be a form of backward integration.