By - King Stubb & Kasiva on March 30, 2023
The Government of India introduced guidelines for production linked incentive scheme for pharmaceutical sector, especially the production linked incentive (PLI) scheme for promotion of domestic manufacturing of medical devices to provide a financial boost and incentive to the domestic manufacturing sector and enable investments in the medical devices production sector.
The objective of this scheme is to promote domestic production of medical devices, decrease reliance on imports, and foster self-reliance in the medical device sector within India.
The tenure of the scheme has been set from Financial Year 2020 – 2021 to 2027 – 2028.
In India, the medical sector suffers a huge setback due to high costs associated with manufacturing along with a disturbance of infrastructural facilities, supply chain, and logistics, lack of cheap financing and lack of proper research in the design and implementation field. Therefore, the government realised the strong need to develop domestic manufacturing of medical devices by offering suitable incentives to create a level playing economic battleground for the domestic manufacturers of medical devices.
The scheme also aims to attract institutional financiers and investors to invest in Indian manufacturers of medical devices, ensuring sufficient funds are available for the domestic manufacturing industry. This will further facilitate the production and research and development of medical equipment.
The scheme has been divided into various categories as target segments for medical devices which are as follows:
The Government has also setup a systematic framework for the selection of applications for the above scheme keeping in mind various relevant factors and the number of applicants. First of all, the selection of applicants will take place based on their ranking factors which may include their turnover, existing level of technical availability, expenses pertaining to research and development, and their approvals. After that, a higher limit of 28 applicants has been set based on the scores obtained from such evaluation.
Since the scheme is divided into various target segments, a maximum number of 10 applicants and a minimum number of 3 applicants will be selected for each scheme. Post the application process, a prima facie examination of the application will be done by the Project Management Agency set as per the guidelines of the project and a letter acknowledging the completion of the examination will be issued. Finally, after approval from all competent bodies, application approval will be given to the selected manufacturer.
There are various mandates that have to be fulfilled by the selected applicant which include providing a bank guarantee as demanded and many other documents to determine the authenticity of the manufacturer.
The process of disbursement involves the submission of claims for incentive disbursement which have to be filed within 9 months of the closing of the financial year for which the claim pertains. The Project Management Agency or PMA then verifies the claims for further process including the verification and recommends the names to the empowered committee.
The empowered committee is responsible for the consideration and approval of claims and incentives which have previously been sanctioned.
There have been significant benefits of this scheme in India which have reduced the dependency of the country on its neighbouring countries like China and Japan for medical technology and hardware. Moreover, the imports have also reduced making India self-sufficient in terms of medical infrastructure.
The scheme has led to a positive impact on the economy wherein less foreign exchange has to be used in order to procure machinery from other countries. Moreover, due to the increased boost to the domestic industries, the project has helped to increase domestic manufacturing and generate employment in the sector.
By increasing production domestically, India will achieve self-reliance and enable domestic producers to compete in the international markets more effectively.
The Production Linked Incentive (PLI) Scheme for promoting domestic manufacturing of medical devices introduced by the Government of India is a major step towards fostering self-reliance in the medical device sector within the country. The scheme aims to promote domestic production of medical devices, decrease reliance on imports, and attract institutional financiers and investors to invest in Indian manufacturers of medical devices. The scheme has shown significant benefits, reducing the dependency of the country on other countries for medical technology and hardware and helping to increase domestic manufacturing and generate employment in the sector. With increased production domestically, India is on its way to achieving self-reliance and enabling domestic producers to compete more effectively in international markets.
The selection of applicants will take place based on their ranking factors which may include their turnover, existing level of technical availability, expenses pertaining to research and development, and their approvals. After that, a higher limit of 28 applicants has been set based on the scores obtained from such evaluation.
There are no legal implications for companies that choose not to participate in the PLI scheme. However, they may miss out on financial incentives and other benefits that come with participating in the scheme.
Foreign companies can participate in the PLI scheme for medical device manufacturing, provided they meet the eligibility criteria outlined by the government. However, the scheme aims to promote domestic production of medical devices, so preference may be given to domestic companies.
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