How India is rebuilding API production — and what Pakistan can learn

Pakistan is not alone in wanting to make more of its own active ingredients. In 2020, India launched a scheme to build domestic production of key starting materials, intermediates and APIs and reduce its import dependence.

The scheme

India’s Production Linked Incentive (PLI) scheme for bulk drugs, approved in 2020 with an outlay of ₹6,940 crore, links incentives to local production of key starting materials (KSMs), intermediates and APIs.

Results so far

The projects include penicillin G (15,000 tonnes a year at Kakinada), clavulanic acid (400 tonnes a year), para-aminophenol — the raw material for paracetamol — (13,500 tonnes a year) and atorvastatin, India’s Department of Pharmaceuticals said in September 2026. By March 2025, the scheme had already saved ₹1,362 crore of imports, and three bulk drug parks are being developed.

Lessons for Pakistan

• Target specific molecules: India focused on critical, high-volume inputs rather than everything at once.
• Link support to production: as the scheme’s name says, incentives follow output rather than plans.
• Build clusters: India is developing three dedicated bulk drug parks alongside the incentive scheme.

An IPRI policy paper published in December 2025 proposed a mid-term goal of 20–30% API localisation for Pakistan and 5–10 year tax exemptions for API production.

How the scheme is designed

India’s bulk drug scheme pays incentives on the sales of eligible products made in new domestic plants, for a fixed period after production begins. Eligible products were chosen because India depended heavily on imports for them, and were split into groups: fermentation-based starting materials and intermediates, such as those used for penicillin and other antibiotics, and chemically synthesised ones. Applicants had to commit to minimum production capacities and investment, so incentives went to plants of a viable scale rather than small, uncompetitive units.

The bulk drug scheme sits alongside other measures: a separate production-linked incentive scheme for finished pharmaceuticals, and the bulk drug parks, where common infrastructure — effluent treatment, solvent recovery, power, water and testing laboratories — is shared by several manufacturers to cut each one’s costs.

Why fermentation was a priority

Fermentation-based ingredients such as penicillin G are produced in very large plants, and a handful of suppliers dominate world supply. Once a country stops making them, rebuilding the capability is hard: it needs biological expertise, big capital investment and a guaranteed market large enough to compete on cost. India’s choice to support a large penicillin G plant shows how a government can target exactly those bottlenecks.

Applying the lessons

Pakistan’s market is smaller than India’s, so it may make sense to focus on fewer products, partner with established foreign producers or aim for export volumes from the start. The Pakistan–China agreements signed in July 2026 point in that direction — see the $850 million pacts.

What to watch

Even with incentives, the first projects took years. Pakistan’s localisation will need patient capital and partners — see why Pakistan imports almost 90% of its APIs. API makers and importers exhibit at Pharma Asia 2026.

Sources

• The Pioneer, “Rs 5,210 crore invested under bulk drugs PLI till June: Govt”, 26 September 2026
• IndiaMedToday, “India cuts pharma import bill by ₹1,362 crore under bulk drug PLI scheme”, 23 July 2025
• Islamabad Policy Research Institute, policy paper on Pakistan’s pharmaceutical sector (Dr Aneel Salman and Sheraz Ahmad Choudhary), December 2025