Govt aims to boost small pharma firms with 6% interest relief on loans

New Delhi: The Union government is ready to roll out an interest subvention scheme for small pharma companies, who wish to upgrade their infrastructure and technology. Under the scheme, the government will bear interest burden of 6% on loans up to «¤??4 crore for a period of three years.

The department of pharmaceuticals (DoP), which has proposed the scheme, has budgeted «¤??144 crore for 2018-20, and aims to help around 250 pharma small and medium enterprises (SMEs), according to documents reviewed by Mint.

Pharma companies utilizing the scheme must achieve incremental export revenue in excess of the sanctioned loan amount within 36 months of the last draw of the loan; failure to do so will attract penalty and the loan will be converted into a regular loan by the financial institution.

The subvention amount credited to the loan account with the sanctioning commercial bank/financial institution will stand withdrawn.

The scheme is aimed at providing interest subvention to small and medium-scale pharmaceutical units having good manufacturing practices (GMP)-compliant manufacturing facilities both for bulk drugs and formulations.

“This has been intended to improve the manufacturing practices and, therefore, quality of the medicines,” said Navdeep Rinwa, joint secretary in the DoP.

According to another official aware of the scheme, the government has for long felt the need to upgrade standards and promote Make in India. The scheme will be implemented through a public sector financial institution that will be selected through a process of open competitive bidding.

“The scheme is aimed to facilitate small and medium pharma enterprises of proven track record to migrate from Schedule M to World Health Organization (WHO)/Good Manufacturing Practices (GMP) norms to enable them to participate and compete in global markets and earn foreign exchange,” said the proposal.

The financial institution extending the loan must ensure that the beneficiary SME obtains WHO-GMP certification within two years from the date of first disbursement of the loan. The scheme allows procurement of new machinery. “Only machinery and electronic management information systems (MIS) required for upgrading a schedule M plant into a WHO-GMP i.e., machinery to meet the gap, are to be considered,” added the proposal.

To ensure effective implementation, a steering committee led by the DoP secretary will be formed to lay down norms. The panel will also set the penalty for erring companies.

Indian Drug Manufacturers’ Association (IDMA) president Deepnath Roy Chowdhury welcomed the move. “It’s a welcome step. We have been pursuing the government for something like this,” he said.

“I think during this critical transition phase of very strict regulatory compliance when the government expects Indian pharma companies to graduate to the next level, SMEs would need handholding and support. I am sure that pharma SMEs will be able to play a more effective role in furthering India’s exports and further consolidate India’s march towards becoming a global pharma superpower.”

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.