Govt may raise sops for medical goods firms
The Union government has held at least two meetings during the course of the week to review the medical goods manufacturing sector, supply systems and manufacturing capacities, discussions which also focused on whether to expand sops currently applicable to the sector, such as the production-linked incentive (PLI) scheme announced last year, an official with knowledge of the matter said.
The meetings assessed all current schemes available to the bio-medical goods and pharma sectors and ways to increase the pace of utilisation of the schemes, an official of the DV Sadananda Gowda-headed chemical and fertilizers ministry said, requesting not to be quoted.
“Our focus continues to be on enhancing domestic production capacity and self-sufficiency in health care. It’s not just about the current situation but (about) long-term… (needs),” the official said.
The government may pivot the focus of the PLI scheme to manufacturers of oxygen and oxygen products, ICU equipment, invasive ventilators and respiratory devices, the official said. These include Covid testing kits and devices, such as bipaps.
“Demand for these types of equipment has increased and will increase in the future. We are constantly looking at what more is needed to boost domestic capacity,” the official said.
India, which imported nearly ₹43,000 crore worth of medical equipment in 2018-19, according to the latest available data, has seen a crippling shortage of medical gear, as an unstoppable second wave of Covid-19 infections tears through the country.
Several schemes came up for review. Two were approved by the Cabinet on March 21, 2020. One is the PLI scheme to boost domestic manufacturing of medical devices worth ₹3,420 crore over the next five fiscals. Two, schemes on promotion of medical device parks for financing common infrastructure facilities in four designated medical device parks, a scheme worth ₹400 crore.
The PLI scheme offers eligible manufacturing companies and sectors a 4-6% incentive on incremental sales over the base year of 2019-20 for a five-year period. When a firm achieves a given sales target, it qualifies for the incentive.
The base year is not simply a cut-off date. Analysts say it has had far-reaching consequences for the performance of the scheme, especially in the electronics and medical devices sector.
Most modern medical devices have high-end electronic components. The massive problems of sourcing in the electronics sector, after India’s border conflagration with China, has had rippling effects on the medical devices sector too.
“The PLI scheme captures (sales) milestone over a base year of production. If you change the base year to 2021 from the existing 2020, then you can tackle a lot of these sourcing issues,” said economist Pronab Sen.
There is a “fair amount of legitimacy” to the demand to change the base year, but so far, the government hasn’t taken any decision, Sen added.
Changing the base year to 2021 from 2020 would base the scheme in the year when supply disruptions have been most acute, requiring alternative sourcing.
Prior to the border dispute with China, supplies were not a problem. Firms are still scrambling for alternative suppliers, whose specifications may not be the same as old suppliers, experts say.
The changes in specifications have required new production lines to be established, which could take up to a year, even as India battles a shortage of medical equipment, Sen said.
Firms have demanded enhancement of the 5% PLI scheme in the medical devices sector to 10%, which is the incentive rate for the auto sector, for instance. All issues were being reassessed in view of the Covid crisis, HT has learnt.
The medical devices sector, which has the highest potential within the health care market, was valued at ₹50,026 crore for 2018-19. It is expected to reach ₹86,840 crore by 2021-22, according to official projections. India depends on imports of up 85% to meet its total domestic demand for medical devices.
The scheme for promotion of medical device parks, announced along with the PLI scheme in 2020, covers cancer-care devices, imaging devices, cardio-respiratory gear, chochlear implants and pacemakers. Officials are weighing options to include ventilators, ICU equipment and oxygen equipment.
“Our health care has traditionally focused on child and maternal health, which also is by no means adequate. We obviously require a massive boost now. Production incentives will add new investment but they are still small,” said health economist Arup Mitra of Delhi’s Institute of Economic Growth.