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DoP modifies successor-in-interest clause of PLI scheme for bulk drugs
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Gireesh Babu, New Delhi
September 27 , 2024
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The Department of Pharmaceuticals (DoP) has modified the guidelines of production linked incentive (PLI) scheme for promotion of domestic manufacturing of bulk drugs, to revise the successor-in-interest clause to allow the beneficiary firms for transfer of business to a wholly owned subsidiary, among others.
The existing clause in the guidelines defines the successor-in-interest as the new or reorganised entity formed after the merger, de-merger, acquisition, transfer of business or significant change in ownership of an applicant.
This clause has now been revised to add that the new or the re-organised entity formed after merger, de-merger, acquisition or "transfer of business to any other entity including a wholly owned subsidiary" or a significant change in ownership of an applicant.
The revision will have its effect on the transfer of the benefits of the scheme to the selected applicant, in case if they have moved the business to a wholly owned subsidiary, apart from the other means of transactions mentioned already under the clause.
According to the initial guidelines for the scheme, issued on October 29, 2020, the applicants who were announced as eligible for the financial support as part of the scheme, shall intimate the Project Management Agency (PMA) of any change in the shareholding pattern during the tenure of the Scheme, after updation with the Registrar of Companies.
Any change in the shareholding pattern of an applicant leading to a successor-in-interest during the tenure of the Scheme, shall be intimated by PMA for approval of the Empowered Committee comprising secretaries of various Departments in the Centre, to consider for disbursal of incentives.
"In case of a successor-in-interest, all investment undertaken by the applicant to whom approval was accorded under the Scheme, would be considered for determining eligibility, subject to approval and compliance with any other condition stipulated by the EC, as may be deemed appropriate," says the guidelines.
The scheme envisages manufacturing of 41 bulk drugs with a total outlay of Rs. 6,940 crore during the tenure of the scheme, which is from 2020-21 to 2029-30. It envisages incentive at the rate of 20% for first four years, 15% for fifth year and 5% for sixth year on eligible sales of fermentation based bulk drugs. In respect of chemical synthesis based bulk drugs, incentive is to be given at the rate of 10% for six years on the eligible sales.
According to latest data from the Department, the PLI scheme for bulk drugs has till August, reported actual investment of Rs. 4,024.69 crore, and an actual production of 1,201.29 crore in 32 projects commissioned. It has also resulted in actual employment to 3,573 persons, till the time.
The DoP has received 249 applications from the industry in four rounds for the scheme till March 26, 2024, and 48 out of them were approved till August, 2024.
The scheme, named as the PLI scheme for promotion of domestic manufacturing of critical key starting materials (KSMs)/drug intermediates and active pharmaceutical ingredients (APIs) in the country, was notified by the Centre on July 21, 2020, and has been revised by the Department of Pharmaceuticals twice in the past.
The revision of the guidelines in July, 2022 was to recategorize manufacturing of vitamin B1 to chemical synthesis route from the fermentation process route and update the rate of incentive accordingly.
Another revision was on March 12, 2024, to revise the provisions related to Scheduled Commercial Operation Date (SCOD) and invocation of bank guarantee. With the revision, the competent authority may, for reasons to be recorded in writing, revise the SCOD of projects which are delayed beyond one year from their original SCOD, without cancelling their approval under the scheme. Earlier, the clause was that the bank guarantee will be released upon achievement of commercial production provided the actual date of commercial production is within one year of the original proposed date.
Where a revision in SCOD is granted, if the project is not commissioned by the revised operation date, their bank guarantee will be invoked without a further grace period of one year after the revised SCOD.
The Scheme was announced by the Centre to attain self-reliance and reduce import dependence in critical KSM/DIs and APIs, and under the scheme, financial incentives shall be given based on threshold investment and domestic sales made by selected applicants for the eligible products.
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