Centre’s PLI scheme for API sector faces challenge from low-cost Chinese imports

The Production Linked Incentive (PLI) scheme of the Central Government for promoting domestic production of active pharmaceutical ingredients (APIs) is facing a major challenge from China.

In a move dubbed as an aggressive pricing strategy, China has slashed the rates of key raw materials (APIs), bringing them down even below production cost. The prices of these critical APIs have fallen sharply, much to the discomfort of the Indian manufacturers, who were endeavouring to reduce dependence on China.

The Union Government had introduced the PLI scheme to reduce dependence on API imports from China and boost its domestic manufacturing. Under the scheme, new API plants were set up in Himachal Pradesh, Telangana, Gujarat and Uttarakhand with investment of hundreds of crores of rupees. “These units were expected to anchor India’s self-reliance in pharma but China’s aggressive dumping policy has rattled their foundations. Several facilities are already running in losses while others are caught in a crisis even before they could operate at full capacity,” says an API manufacturer.

“While the new manufacturing units are yet to optimally utilise their capacities, they have been hit hard by low-cost Chinese imports. China is deliberately waging the price war to tighten its grip on the global market. As production costs in India is higher, domestic manufacturers are finding it impossible to match such artificially-suppressed prices,” rues another API manufacturer, who is yet to breakeven after investing crores of rupees on the new facility.

The Union Government is seeking detailed information from the API manufacturers about the adverse impact of the low-cost Chinese imports but it is yet to announce measures to offset this new challenge that is set to wreck the PLI scheme.

Indian pharma associations and investors have urged the Central Government to intervene and introduce protective measures like raising import duties on Chinese APIs and accelerating anti-dumping investigations.

Investors are also urging the Union Government to grant them additional subsidies so that their new investments could sustain, as the Chinese move is set to cripple the Indian API industry.

At present, nearly 65 per cent of India’s API requirements are met through Chinese imports. After the Covid-19 crisis, the government’s mission to reduce dependence on China is now under serious threat if immediate measures are not taken to counter the Chinese move, say the API manufacturers.