The PLI Bulk Drugs scheme — what worked, what didn't, and what comes next
An operator's view of India's flagship pharmaceutical incentive programme — three years in, what the scheme actually achieved, where it missed, and what version 2.0 needs to do differently.
India's Production-Linked Incentive scheme for bulk drugs — formally announced in 2020, with disbursements running through the mid-2020s — has been one of the most consequential pieces of Indian pharmaceutical policy in a generation. From inside the industry, three years into the programme, I want to share an honest operator's view of what it achieved, what it missed, and what comes next. Laksh Finechem was not a direct PLI awardee in the first round, but the scheme reshaped the competitive context every Indian regulated-API manufacturer operates in. The lessons matter for the entire ecosystem.
What the scheme set out to do
The PLI Bulk Drugs scheme committed roughly ₹6,940 crore to incentivise domestic manufacturing of 41 critical Key Starting Materials (KSMs), drug intermediates and APIs that India had become heavily import-dependent on — largely from China. The instrument was a per-kilogram incentive over six years, conditional on capacity utilisation, export milestones and product-specific minimum thresholds. The strategic objective was supply security, not just industrial subsidy.
What worked
Three things worked materially. One — the scheme catalysed real capacity build. Across the awardee list, well over USD 2 billion in new manufacturing capacity has been committed and significant portions commissioned. That capacity exists. It is producing. It is reducing import dependence on the targeted molecules in a measurable way.
Two — the scheme forced operating discipline. The PLI framework requires audit-grade capacity utilisation tracking, export documentation and product-quality verification. Awardees who took the framework seriously came out of the cycle with much better operating systems. Several smaller awardees told me privately that the PLI framework was harder than any customer audit they had previously faced — and that the resulting discipline was its own asset.
Three — the scheme sent a credible signal to global customers that India was serious about supply-chain capability. The China-plus-one shift accelerated meaningfully in the period after PLI announcement, partly because customers could point to documented Indian capacity expansions when justifying supplier diversification internally.
What did not work as well
Three honest critiques. One — the molecule selection was anchored in 2019-2020 import-dependence data. By the time disbursements began, the global pharmaceutical pipeline had moved on; some of the targeted KSMs are now of declining commercial importance, while several genuinely strategic newer molecules sit outside the scheme.
Two — the scheme heavily favoured large producers. The minimum capacity thresholds, capital commitment requirements and bureaucratic documentation burden made participation prohibitive for SMEs in the ₹50-300 crore turnover band — exactly the band where India's competitive flexibility lives. Several mid-sized specialists who could have built world-class capacity in niche segments did not bid because the structure did not fit their economics.
Three — implementation timelines slipped meaningfully against original commitments, partly due to environmental clearance backlogs and partly due to the complexity of multi-step API capacity build. The scheme's intended output by 2026 will, realistically, be delivered closer to 2028.
What PLI 2.0 needs to do differently
Five operating-level recommendations from inside the sector. One — refresh the molecule list to reflect current and emerging import dependencies, not the 2019 snapshot. Two — introduce a smaller-capacity tier (capex thresholds of ₹50-150 crore) so mid-sized regulated-API specialists can participate without restructuring their entire balance sheet. Three — extend the scheme explicitly to complex generics — peptides, controlled-release intermediates, sterile injectables, contrast media — where Indian capability is genuinely competitive globally. Four — fold environmental compliance investment (effluent treatment, solvent recovery, emissions controls) into the qualifying capex base. Five — shorten the disbursement cycle so manufacturers don't carry the working-capital cost of unfunded incentives for years.
What this means for the next decade
PLI was not a perfect instrument. Few first-generation industrial policies are. What matters is that it established the political and operating consensus that Indian pharmaceutical manufacturing capacity is a strategic asset worth subsidising — and it normalised audit-grade capacity reporting across a much wider base of Indian manufacturers than existed before.
Whether or not a formal PLI 2.0 arrives, the next decade of Indian pharma will be defined by manufacturers who absorbed the operating discipline the first scheme demanded. Laksh's plant in Anand was not in PLI's first wave, but our QC infrastructure, capacity tracking systems and customer-audit posture are markedly better today than they would have been without the broader industry shift the scheme catalysed.
Government policy creates context. Operating discipline creates outcomes. Both matter; neither replaces the other. The Indian manufacturers who will define the next decade are the ones who treated PLI as a forcing function for the operating bar they would have had to clear anyway — and who are now ready for whatever the next policy instrument turns out to be.
Got a question on what you've just read — or a project that touches one of the categories above? Write directly to the office.
First-generation Indian industrialist. Founder and Managing Director of Laksh Finechem — a WHO-GMP, FDA and ISO-certified manufacturer of APIs, iodine derivatives and specialty chemicals.