Pharma, solar PLIs under rethink as dependence on Chinese imports continue: Govt official

Under the pharma PLI scheme, incentives are given to the industry for manufacturing key starting materials, drug intermediates and active pharmaceutical ingredients (APIs) locally. “But China has reduced prices on chemicals which are the inputs for APIs. Other manufacturers (those not part of the PLI scheme) are able to match the API cost because they are importing chemicals from China,” he said.

Apart from APIs, the pharmaceutical industry is also grappling with the influx of low-cost finished formulations. Despite the PLI scheme's stated goal of stimulating domestic production and reducing dependence on imports, Indian manufacturers are facing fierce competition from Chinese counterparts who benefit from lower production costs. This not only undermines the competitiveness of local players but also compromises the self-reliance objective of the PLI scheme.

According to a Care Ratings report, imports of bulk drug from China have been soaring in terms of both value and volume, growing 64 and 62 percent in FY14, and by 71 and 75 per cent in FY23, respectively.

Solar PV Modules PLI 

Though the government has brought in the PLI scheme for solar PV modules, the other input components in the value chain like solar glass are still being imported from China.

“The largest production of solar wafers is in China on which there is no PLI (in India to act as a buffer for local manufacturers). The PLI incentivises for the difference of price that Indian manufacturers bear. But China has dropped prices further,” the official said.

An example is Borosil Renewables, which expanded its manufacturing capacity of solar glass, a critical component for solar modules. But solar PV module manufacturers are opting for cheaper Chinese solar glass. To make things worse, the government in 2022 also removed the anti-dumping duty on solar glass imports.

“PLI manufacturers are importing solar glass from China as anti-dumping has been removed. Borosil Renewables’ margins are affected, which has also deterred the industry. This is because the entire value chain is not covered by PLI,” the official said.

Chinese dominance in the solar energy sector presents a formidable obstacle to the PLI scheme's goal of fostering indigenous production. Chinese imports, buoyed by economies of scale and aggressive pricing strategies, have inundated the Indian market, undercutting the viability of domestic manufacturing initiatives. This not only impedes the growth of domestic solar manufacturing but also poses a threat to India's renewable energy ambitions.

On the other hand, if the government reintroduces anti-dumping duty, prices may rise, which may hamper the government’s commitment to ensure that about 50 percent of installed capacity of electricity generation comes from non-fossil fuel-based energy sources by 2030, the official said.

The formidable challenge posed by Chinese imports underscores the urgent need for proactive measures to safeguard the efficacy of PLI schemes across the pharmaceutical and solar sectors. While the PLI schemes for the two segments hold immense potential to revitalise India's manufacturing landscape and propel economic growth, they are currently navigating a challenging landscape. Addressing the underlying issues and streamlining the implementation process will be crucial to unlocking the full potential of these schemes, the senior official said.