India’s Union Cabinet has approved an investment package worth $1.3 billion to boost the country’s pharma and API production. The move is designed to reduce dependency on other countries, particularly China, for its drugs and intermediate, a situation highlighted by the current coronavirus crisis.

“The timing of the announcement was crucial, as Indian pharma companies are facing potential supply disruptions due to the Covid-19 outbreak,” said Prashant Khadayate, pharma analyst at data analytics and consulting company Global Data.

The package includes establishing three mega parks for bulk drugs production over the next five years. The government will provide grants-in-aid to states with a maximum limit of 1,000 crore rupees, or $131 million, for each park, which sill will have common facilities such as solvent recovery and distillation plants, power and steam units and common effluent treatment plants. A sum of 3,000 crore rupees, or $394 million, has been approved for this scheme for the next five years.

In addition, the package includes a production-linked incentive (PLI) scheme for boosting domestic manufacturing of critical key starting materials, drug intermediates and APIs. Financial incentives will be given to eligible manufacturers of 53 identified critical bulk drugs on their incremental sales over the base year (2019-2020) for six years.

Of these 53 drugs, 26 are fermentation-based and 27 are chemical synthesis-based.  The rate of incentives will be up to 20% for fermentation-based bulk drugs and 10% for those based on chemical synthesis.

The Indian Pharmaceutical Alliance (IPA) has welcomed the move. “This is a major step in the creation of a self-sufficient healthcare ecosystem in the country. We believe the government’s policy announcement will give the sector a huge boost,” it said.

Satish Reddy, president of IPA and chairman of Dr Reddy’s Laboratories, added that the package will “help revive the API industry in the country and will help the sector regain the dominance that was lost over the years.”

Despite India’s pharmaceutical industry being the third largest in the world by volume, the country is significantly reliant on imports of basic raw materials and is said to import nearly 70% of its APIs from China. Also, for some specific bulk drugs, India’s dependence is between 80-100%.

The country is the world’s single largest exporter of generic drugs an according to IPA is responsible for about 20% of global supply.