PTUAS' modification, a wise move but with a limited reach

The DoP's move comes after it received several representations from stakeholders seeking inclusion of PFIs. Subsequent to this, the DoP has modified clauses related to five per cent interest subvention for loan components eligible under the scheme and the one that seeks the beneficiary to submit bank guarantee at the time of applying for the first interest subvention claim

In a move that will go a long way in providing the much needed financial assistance to Micro, Small and Medium Enterprises (MSMEs) in the pharmaceutical sector, the Department of Pharmaceuticals (DoP), under the Union Ministry of Chemicals and Fertilisers, recently modified some clauses in the guidelines of Pharmaceuticals Technology Up-gradation Assistance Scheme (PTUAS). This will allow companies which availed loans from RBI-registered public financial institutions (PFIs) to benefit from the scheme. Launched by the central government on July 21, 2022, PTUAS is a credit-linked scheme and is among three sub-schemes of 'Strengthening Pharmaceuticals Industry' (SPI) Scheme' to strengthen the country's pharma MSMEs. It aims to facilitate MSME of a proven track-record to upgrade technology to meet WHO-GMP or Schedule M standards.

The DoP's move comes after it received several representations from stakeholders seeking inclusion of PFIs. Subsequent to this, the DoP has modified clauses related to five per cent interest subvention for loan components eligible under the scheme and the one that seeks the beneficiary to submit bank guarantee at the time of applying for the first interest subvention claim. While so far the loans sanctioned by scheduled commercial banks in the public and private sector was only eligible for the scheme and the bank guarantee had to be from any scheduled commercial bank, the latest modification implies that loans from PFIs registered with RBI and the bank guarantee from such PFIs are acceptable under the PTUAS.

According to the scheme, up to a maximum of 5% per annum (6% in case of units owned and managed by SC/STs) of interest subvention for loan component is eligible under the scheme taken to the upper limit of Rs 10 crore, for a maximum period of three years on reducing balance for sanctioned loans by any scheduled commercial banks. And the scheme will be extended to public financial institutions registered with Reserve Bank of India both in the public and the private sectors.

The Indian pharmaceutical industry is the world's third largest by volume and 14th largest in terms of value. And India has the second highest number of US FDA-approved plants outside the US. Indian pharma exports witnessed a growth of 103 per cent since 2013-14, from Rs. 90,415 crore in 2013-14 to Rs. 1,83,422 crore in 2021-22. The exports achieved in 2021-22 are the sector's best export performance ever.

However, only 1,235 of 6,000 MSMEs have WHO-GMP certification. Of course, the country wanted to further increase export. In this backdrop, the launch of SPI scheme is significant as it envisages technology upgrade, establishing common research centres and effluent treatment plants in clusters for pharma MSMEs which will help them improve their product quality and exports.

It was incorporated as a sub-scheme under SPI scheme, which was launched last July. The SPI scheme, with an outlay of Rs. 500 crore and a tenure from FY 2021-2022 to FY 2025-26, has three components, to provide infrastructure support for pharma MSMEs in clusters and address crucial issues. The components include assistance to Pharmaceutical Industry for Common Facilities (API-CF), Pharmaceutical Technology Upgradation Assistance Scheme (PTUAS), Pharmaceutical & Medical Devices Promotion and Development Scheme (PMPDS).

Alas, DoP has set a target of providing financial assistance of Rs. 10 crore each to only 420 MSME pharma manufacturing units under PTUAS. This is way below the needed reach. Out of 6,790 pharma MSMEs in the country, over 4,500 units remain outside the purview of WHO-GMP certification. It is rather unfortunate that only a miniscule percentage of MSMEs has been taken up for up-gradation and that too up to 2026.

Of course, DoP has taken a right step in modifying PTUAS. It is pertinent that DoP should review the target of upgrading just 420 MSMEs by 2026 and increase this figure while simultaneously reducing the time involved in the process. The remaining 4500 MSMEs should also be upgraded to WHO-GMP certification, the sooner the better.

(The author is a freelance journalist with varied experience in different fields)