The new MedTech scheme launched by the government recently can expand the sector to $20 billion, up from $14 billion currently, experts said. The scheme, with an outlay of Rs 500 crore over three years, incentivises domestic manufacturers to make final products and raw materials in the country which will enable them to compete with imported products and venture into new markets globally.
Experts said this scheme is going to trump the existing performance-linked incentive (PLI) scheme which was introduced in FY21. “There’s a now clear direction from the government. It’s no longer a lip service. The PLI scheme has mostly benefitted large multinational companies. There was nothing for medium, small and micro enterprises. The PLI scheme for medical device has a budget of Rs 3,500 crore but the actual disbursement has been low as compared to the funds available. This latest scheme will enable the local manufacturers to compete with the imports market,” said Rajiv Nath, forum coordinator at Association of Indian Medical Device Industry (AiMeD).
“A lot of domestic manufacturers are dependent on imported components as their raw material. The scheme will lead to backward integration where manufacturers can now start making these components within the country,” said head of another medical devices association.
The scheme is divided into five parts, including strengthening the existing infrastructure of manufacturers, reducing import dependence, capacity building and skills development, support for clinical studies and an overall promotion scheme. “The industry promotion stimulus will pave the way for vitally important market research and marketing of the industry to the world,” said Pavan Choudary, chairman at Medical Technology Association of India (MTaI).
At the moment, India relies 70% on imports for the medical devices. Though the number has come down sharply (from 90% before) since the PLI scheme but there’s large scope to bring it down further.
Experts said that scheme will reduce the cost of medical devices as the margins on imported products are higher compared to margins of domestic manufacturers. It’s expected that the cost of medical devices will come down by 5-7%. In addition, the local manufacturers stands to gain substantially as they can now get into long-term contracts with potential buyers.
“Currently, local manufacturers and traders cannot get into long-term contracts (like 2 years) with buyers like hospitals and government agencies. Most of the contracts are for 3-6 months, or for a specific quantity. This is because they cannot make long-term commitments due to possible supply chain issues. Also, the currency fluctuations affect their ability to go for long-term deals. Once these manufacturers can start making devices locally, they will have price stability, and their volume of business would go up. They can also potentially enter new markets,” said Nath of AiMeD.
