Bulk drug manufacturing scheme must look beyond new plants: India supplies affordable generic medicines to much of the world, but relies heavily on China for many of the ingredients that go into them. In 2024–25, China accounted for 73.7% by value of the $4.35 billion in imports of active pharmaceutical ingredients (APIs), bulk drugs and intermediates tracked by the Department of Pharmaceuticals.
On November 9, Business Standard reported that the department was drawing up a ₹7,000 crore scheme to expand domestic production and extend incentives to existing plants. The proposal comes after an earlier scheme attracted more investment than companies had committed. The harder task is to keep those factories running at costs that Indian drugmakers can afford.
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Where India’s drug supply depends on China
An API gives a medicine its therapeutic effect. Making it can take several stages, beginning with chemical or biological inputs and passing through one or more intermediates. A company can make the active ingredient in India and still depend on a Chinese supplier for a substance needed two steps earlier. That dependence matters particularly for medicines such as antibiotics and antifungals, where an interruption in supplies can raise costs or delay production.
As China built large chemical and pharmaceutical clusters, its manufacturers gained access to specialised suppliers and could spread costs across much larger production runs. For Indian companies, it often made commercial sense to buy ingredients and intermediates from China. The consequences became visible during the pandemic, when prices for several ingredients rose sharply. Rebuilding capacity is especially difficult for fermentation-based products, where a plant needs specialised equipment and must be able to reproduce the same yields and quality at industrial scale.
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What the first bulk-drug PLI achieved
The government approved the ₹6,940 crore production-linked incentive (PLI) scheme for bulk drugs in 2020. It covered 41 critical products and was designed to encourage companies to build new plants. By June 2026, companies had invested ₹5,210.74 crore against commitments of about ₹4,330 crore. Thirty-nine projects had been commissioned, and domestic production had begun for fermentation-based products such as Penicillin G and clavulanic acid. Beneficiaries had recorded ₹3,792.49 crore in sales, including exports.
By March 2026, however, the government had disbursed only ₹87.70 crore in incentives. The department told Parliament that delays in commissioning had held back payments, which are tied to eligible sales. For a plant that has begun production, the difficulty is securing enough orders to use its capacity. Indian drugmakers have good reason to buy cheaper inputs, particularly when they compete on the price of finished medicines. A domestic supplier facing higher utility and input costs may struggle to win those orders even after its factory opens.
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The proposal takes in earlier stages of production
The new scheme would reserve ₹5,000 crore for production incentives, with the remaining ₹2,000 crore going towards research, common infrastructure and capital subsidies. A proposed ₹500 crore research allocation sits within that second amount. The department is considering support for 52 groups of related molecules covering more than 300 intermediates and downstream APIs. Existing plants could qualify alongside new ones, giving manufacturers scope to upgrade a production line or expand a facility that already has trained staff and utilities.
Grouping related products makes sense where they use the same inputs or production processes. An Indian API plant is less exposed to a supply interruption if it can buy the intermediates it needs from a dependable local producer. Research funding can help where the production process itself is the obstacle. In fermentation, for example, better microbial strains and higher yields can lower the cost of each batch. That improvement can outlast the subsidy.
Bulk drug manufacturing scheme: A factory needs orders after the subsidy ends
The separate ₹3,000 crore Bulk Drug Parks scheme is meant to bring down costs by providing shared utilities and facilities such as effluent treatment. Parks in Andhra Pradesh, Gujarat and Himachal Pradesh were at different stages of development as of February 2026. For manufacturers deciding whether to expand, the relevant question is when they can use those facilities and what they will pay for them.
Cheap imports help keep generic medicines affordable. The case for public support is strongest where a disruption would threaten supplies of essential medicines and buyers would have few alternatives. For those products, the department should track how much plants sell, how much capacity they use and whether they still rely on a single overseas source for key inputs. The test comes when the subsidy runs out and a generic drugmaker has to decide where to place its next order.