How PLI Scheme is Reshaping India's Drug Production Future

In an interaction with Thiruamuthan, Correspondent at India Pharma Outlook, Vikram Aditya Sehgal, Director – Finance, Centrient India, discusses India’s PLI-backed API projects are strengthening domestic manufacturing and reducing import dependence, but mid-sized firms face capital and compliance hurdles; future success will require deeper backward integration, innovation incentives, and sustained regulatory and infrastructure support. Vikram is a seasoned finance and accounting professional with over 19 years of Industry and Consulting experience across diverse geographies and industries, including pharmaceuticals, real estate and construction sector, consumer goods manufacturing and Internet-based businesses.

India has launched over 50 PLI-backed API projects to cut Chinese dependence on critical drugs. Are these initiatives measurably reducing import reliance across key therapeutic categories today?

The PLI-backed API projects represent a strategic step toward reducing India’s reliance on imports for essential drugs. While these initiatives have made good progress in boosting domestic manufacturing and strengthening supply chains, it is still too early to see a clear, measurable drop in import dependence across all key therapeutic areas. Currently, India imports about 70% of its bulk drugs and APIs. However, these projects are building a solid foundation for greater self-sufficiency, and as they expand over the next few years, we expect them to have a real impact in lowering import dependency in critical therapeutic sectors.

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Despite being eligible, many mid-sized pharma firms are falling short on PLI targets. Are high CapEx demands, delayed payouts, and regulatory complexity limiting their participation?

The PLI scheme has significantly advanced India’s pharmaceutical self-reliance agenda, but some structural challenges still limit full participation from mid-sized pharma firms—delays in payouts are not one of them. The scheme effectively encourages domestic manufacturing of APIs, KSMs, and high-value pharmaceutical products. Still, mid-sized pharmaceutical companies face a few key challenges in fully benefiting from the scheme to its full potential.

One of the main challenges is the high capital expenditure (CapEx) demands, as building or upgrading facilities to meet global regulatory standards and produce complex API or specialty drug production requires substantial upfront investment. For mid-sized firms, especially those without access to low-cost capital or global backing, this remains a major barrier.

Another issue is the complexity of regulatory and compliance requirements. To claim incentives, companies must submit detailed documents, track milestones, and provide evidence of progress. While this is important for transparency, it can be hard for firms that lack the internal systems or staff to handle such demands.

Despite this, the government generally processes incentive payouts on time and in some cases, even faster, once firms meet performance targets and submit the needed paperwork. This has helped build trust in how the scheme is being run.

Overall, the PLI scheme has created a strong foundation for India’s pharmaceutical growth by encouraging innovation, reducing import dependence, and increasing export potential. To enable broader participation from mid-sized firms, continued support in infrastructure access, affordable financing, and technical guidance will be important.

India’s pharmaceutical growth will be strongest when both large and mid-sized enterprises contribute equally to this transformation.

The PLI framework rewards production volume but lacks direct incentives for R&D or complex formulations. Is this reinforcing India’s low-margin manufacturing model rather than enabling innovation-led growth?

It’s true that the core design of the PLI scheme focuses on production-linked incentives, which naturally reward higher output. But it’s not accurate to say the scheme ignores innovation or encourages only low-margin manufacturing.

The PLI scheme fits into a larger plan to move India up the pharmaceutical value chain, from a leader in generics to a strong player in complex APIs, biologics, specialty drugs, and innovation-led manufacturing. While the incentives are linked to sales, the eligibility conditions and product categories show a clear shift toward high-value, technically advanced products.

For example, the PLI for pharmaceuticals includes products like fermentation-based APIs, biopharmaceuticals, and complex injectables. These categories require strong R&D and major regulatory investment. The scheme doesn’t directly fund R&D, but it rewards the commercial success of R&D through sales-based incentives. In doing so, it encourages firms to invest in innovation with a performance-based reward structure.

That said, India’s pharma sector still lacks a focused policy for early-stage innovation or R&D funding, especially for mid-sized and emerging firms. Closing this gap, possibly with a dedicated innovation-linked incentive program, could speed up work on new drug development, novel delivery platforms, and biosimilars. That kind of support would help deepen the industry’s innovation pipeline.

In short, the PLI scheme is a step in the right direction—but not the final one. It helps shift the industry from low-margin output to high-value production. However, India’s long-term leadership in pharma will also depend on targeted policies that support research, IP development, and early-stage innovation.

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India’s pharma capacity is expanding rapidly under PLI, but domestic ecosystem dependencies remain limited. Is the scheme encouraging real backward integration in areas like intermediates, solvents, and fermentation-based ingredients?

The PLI scheme is a meaningful step toward real backward integration, especially in historically import-dependent segments like fermentation-based APIs, intermediates, and solvents, but it remains a work in progress.

One of the core goals of the PLI scheme is to reduce India’s reliance on imports, particularly from China, for critical raw materials, including key starting materials (KSMs), APIs, and drug intermediates. This intent is clearly reflected in the government’s targeted support for high-priority APIs, many of which are fermentation-based or involve complex synthesis processes that had largely shifted overseas over the past two decades.

Since the scheme’s launch, several domestic manufacturers have started investing in building or reviving capabilities in fermentation-based production, solvent recovery systems, and intermediate synthesis. These investments have been encouraged by clear policy direction and predictable incentive timelines.

That said, the ecosystem is still evolving. Many upstream raw materials and fine chemicals are still sourced internationally due to cost advantages, limited domestic production capacity, or technology gaps. For true end-to-end integration, India must strengthen allied sectors such as chemical manufacturing, fermentation technology, and industrial biotech, backed by focused R&D and financial support.

The PLI scheme has helped make upstream production financially viable again and pushed the industry in the right direction on backward integration. But full supply chain independence will take time and broader support. India will need continued focus on infrastructure, access to technology, and building capabilities across the ecosystem to make that possible.

PLI beneficiaries must now scale rapidly while staying compliant with CDSCO and global GMP expectations. How are firms balancing fast-track growth with regulatory quality and operational stability?

Balancing fast growth with strong regulatory compliance is one of the most important and difficult tasks for companies under the PLI scheme. For many firms, this isn’t just about meeting requirements; it’s a strategic necessity. The scheme has driven rapid expansion, but with it comes the need to meet strict eligibility norms, including compliance with CDSCO, global GMP standards (such as USFDA, EMA, and WHO), and environmental regulations. As companies ramp up production, often on tight timelines, they also need to upgrade their quality systems, documentation, and risk controls.

Leading firms are approaching this challenge in three key ways. First, they invest early in Regulatory Infrastructure by designing GMP-compliant facilities, hiring quality and regulatory staff early, and adopting digital quality management systems. This proactive approach helps avoid costly changes later and ensures readiness for global audits. Second, many mid-sized firms partner with experienced advisors such as technical consultants, CDMOs, and compliance experts. These partnerships help them navigate complex regulatory requirements and stay on track during scale-up. Third, companies often take a phased, modular approach to expansion, bringing production lines online step-by-step. This allows them to test quality systems, learn from inspections, and maintain operational stability throughout growth.

The PLI scheme does not reduce regulatory expectations to speed up output; in fact, it reinforces them. Since incentives are linked to ongoing production and regulatory clearances—including approvals for export markets—companies that maintain compliance benefit the most. Increasingly, PLI beneficiaries recognize that long-term success depends not just on adding capacity but also on building credibility. The firms that thrive under the scheme are those that embed quality, compliance, and operational discipline into their growth plans from day one.

With biosimilars and complex generics reshaping global pharma, India must evolve beyond volume exports. How can a new PLI phase accelerate industry-wide movement toward high-value drug manufacturing?

A new phase of the PLI scheme could play a key role in helping India move beyond high-volume generics to high-value drug manufacturing, particularly in biosimilars and complex generics.

To support this transition, the next phase of PLI should go beyond rewarding scale and place greater emphasis on innovation and advanced capabilities. This could include incentives for R&D-intensive products such as biosimilars, long-acting injectables, and specialty formulations.

It should also support modern manufacturing technologies, including continuous production and single-use bioreactors. Shared infrastructure and biotech clusters could enable mid-sized firms to access world-class facilities without large capital investments.

Fast-track regulatory support will be essential to speed up approvals for complex drugs, while targeted skilling programs can help develop the talent needed for high-tech roles in the pharmaceutical sector.

India already has a strong foundation in manufacturing. With the right policy push, it can position itself as a global leader in innovation-driven, high-value pharmaceuticals.