Developing Global Steel, Electronics, Biotechnology, Pharmaceuticals Sectors Manufacturing Hubs: Creating an Enabling Environment for Manufacturing in India - Vision India 2047

“The world is looking at India as a manufacturing powerhouse …. Positive factors like demographic dividend of young and talented population, democratic setup, natural resources should encourage us to move towards Make in India with determination…. Aatmanirbharta is all the more important if we see from the prism of national security…You will have to maintain global standards and you will also have to compete globally”. PM Shri Narendra Modi addressing the DPIIT webinar on “Make in India for The World”, March 2022.

Introduction
1. Raising the Share of the Manufacturing Sector in the GDP: Keeping in view the need to raise the share of the Manufacturing in the GDP from the present 17% to above 25%, in order to accelerate economic growth and generate employment, India would need to aim for developing global level manufacturing hubs in select areas, progressively. Sectors like Steel, Electronics, Biotech, and Pharma where India has considerable potential, will need to be focused on to start with besides providing an enabling environment for macro manufacturing and business.

2. Surya Foundation Think Tank comprising experts on the subjects deliberated on various issues related to Developing Global Steel, Electronics, Biotechnology, Pharmaceuticals Sectors and Creating an Enabling Environment for Manufacturing according to Vision India 2047. Recommendations arrived at are enumerated in the succeeding paragraphs.

STEEL SECTOR
3. Present Status: India is currently the world’s second-largest producer of crude steel (127.2 million tons (MT in 2022) against a Global production of 1,885.4 MT). China contributed 54% to the Global production in the same year (World Steel Association report). Against the world average per capita consumption of 221.8 kgs of steel in 2022, India’s consumption is a mere 81.1 kgs against China’s 645.8kg. The share of steel framed construction in India is 10% as opposed to 40% in Japan, 50% in Australia and 60% in the US.

4. National Steel Policy 2017: As per the National Steel Policy, (2017) production capacity will need to be increased to 300 MT by 2030 to meet demands due to infrastructure growth and other development requirements. As per the present scenario, this target may be met only some years after 2030. This expansion in capacity will call for massive investments (Rs 7000 Crore per MT and more for green steel production) and may necessitate the need for FDI, which can simultaneously bring in the latest technology and facilitate export opportunities to foreign markets.

ISSUES, CHALLENGES AND SOME RECOMMENDATIONS
5. Steel Production in India is Highly Emission Intensive: In India on average, 2.36 Kg of carbon is emitted per kg of steel produced, against 1.8 to 2 Kg of carbon in developed countries. The steel industry is accountable for a third of the country’s direct industrial Carbon Dioxide (CO2) emission. With the target of raising capacity to 300 MT by 2030 and the national target of net-zero emissions by 2070, steel decarbonization will become a major challenge confronting the industry.

6. Factors Contributing to High Carbon Intensity in Indian Steel: Inadequate availability of domestic Natural Gas (NG), which is 50% less carbon intensive than coal and limited supplies (around 15 to 20% of total requirement) of high-quality steel scrap within the country (having only 20% carbon emission when compared to iron ore) are key factors. Another important issue is the inadequate availability of low-ash coal. 80-90% of coking coal for Blast Furnaces (BF) – Basic Oxygen Furnaces (BOF) and around 50% of non-coking coal for Direct Reduced Iron (DRI) are imported. D grade domestic coal, used by the remaining 50% of DRI plants causes emissions of more than 3 Tons of Carbon Dioxide (TCO2) per Ton of Crude Steel (TCS). Further, smaller BFs (25 years old on average) constituting 40% of overall production capacity are less energy efficient compared to larger furnaces. DRI industry is also comparatively less regulated (from environmental angle) than the BF-BOF industry, with large number of small units.

7. Relative Emission Intensity: The relative emission intensity (TCO2/TCS) of different process routes in the steel industry is as under: -
(a) Coal-based DRI- Electric Arc Furnace (EAF)/ Electric Induction Furnace (EIF): (2.8-3.0).
(b) BF- BOF: (2.3-2.6).
(c) NG-based DRI/EAF: (1.5-1.6).
(d) 100% scrap in EAF/EIF: (0.55-0.57).
(e) H2 + Renewable Energy based DRI-EAF:

8. Steel Production Processes and Energy Cost: Percentage of steel produced by different processes in India is
(a) BF-BOF: 46%
(b) EIF: 28%
(c) EAF routes: 26%
(d) Energy component constitutes 20-40% of production cost.

9. Green Steel Initiatives: Planning for Carbon Emission Reduction (CER)/Elimination:
(a) Large steel production facilities (around 60% of capacity in India) exporting to international markets also, will be facing tariff barriers in the form of Cross Border Adjustment Mechanism (CBAM) by the European Union (EU) and other developing countries levying high duty against import of non-green products. Besides there is India’s commitment to zero emission by 2070. Hastening Green Steel initiatives is vital to India’s long-term interests.

(b) Globally use of hydrogen for steel reduction is now becoming a favoured option. India’s National Green Hydrogen Mission has set a target of producing 5 Million Metric Ton (MMT) per year of green hydrogen besides reducing the cost of green hydrogen to $1 per kg by 2030. The preferred route is through the Electrolysis process powered by Renewable Energy (RE). Govt has announced concessions wherever Green (Wind/Solar) power is used for green hydrogen production.

(c) EU is planning to provide Viability Gap Funding (VGF) for prototypes and scaling-up initiatives. India needs to hasten its efforts in this direction. One way to reduce VGF in India (but at the same time build economy of scale in production of hydrogen) can, for the present be to restrict the three times costlier green hydrogen for manufacturing green steel for export only and consider using the cheaper grey hydrogen (from refineries or using coal-based power) for domestic consumption. Govt may also support Atma Nirbhar initiatives, on topmost priority for production of Hydrogen from coal or biomass (net carbon neutral). In either case, Govt must support the costlier green steel produced, in its procurement (as EU has promised to its producers).

(d) It will be helpful if the Govt can bring out a policy on Green Steel (defining the same) and place grey hydrogen steel based on its carbon intensity, in suitable grades for differential pricing. Govt may also take action to bring in CBAM on lines of EU to protect its green and grey steel production.

10. Planning for Green Hydrogen:
(a) Planning for the manufacture of electrolysers in India is also in progress. However, the planning from the steel sector to build prototypes and scale up for hydrogen reduction is yet to gather momentum except Tata Steel’s reported attempt to run a small prototype with an injection of 5 kg of hydrogen over 4 days and JSPL already adopting coal gasification/synthetic gas route for steel production with carbon capture of 2000 Tons Per Day (TPD) and planning for some DRI units for switch over to natural gas with blending with hydrogen in increasing proportion progressively. Pending VGF schemes to be finalized, the Govt should ask steel PSUs to progress the prototype/scaling buildup for Green Steel. Assurance may be given that the costly green steel products would be covered in government procurement contracts.

(b) Private sector steel plants should also announce their green initiative plans. Tata Steel can also examine use of their model now planned in its unit in Netherland. All new additions in new furnaces route should aim toward lower carbon intensity.

(c) A number of small Electric Furnaces are operating for melting steel scrap from Alang ship breaking yard in Gujarat. Govt may consider extending VGF for green steel production for scaling up these units with some blending of green hydrogen. Govt may also expedite present plan for doubling Alang ship breaking yard capacity to 9 MT. With this export of around 8 MT green steel, at lower cost, can be planned. There has been a drop in ship breaking at Alang due to overbidding by Pakistan and Bangladesh with their Govt’s Financial support. The Indian Govt may support firms operating from Alang against overbidding. Under the prevailing circumstances adding steel scrap at somewhat higher price is a better option than going in for high-cost hydrogen.

(d) As a Carbon Emission Reduction (CER) measure through the grey hydrogen route, plants using synthetic gas, etc. may be considered initially for financial support. Govt is also planning projects for 100 MT coal gasification and distribution for DRI units by 2030 in Eastern sector. In DRI units, replacement of rotary kilns by vertical shaft furnaces may be encouraged.

(e) In Gujarat and Western coastal areas, with proximity to imported gas terminals, use of natural gas (with 50% less carbon intensity) in BFs/ DRI plants can be considered.

(f) Some global studies have indicated the need for rich iron content ores (above 65%) for use in the hydrogen reduction process. There is a global shortage of rich iron ore. India with the bulk of its reserves in 60% rich or lower categories must reserve all available rich grades for the hydrogen reduction process. Exploration and mining of rich iron ore should be expedited. Beneficiation of iron ore in existing production will also need to be examined.

(g) Use of Carbon Capture, Utilization & Storage (CCS&U) technology must simultaneously be considered in the BF and BOF route for some carbon emission reduction. As this technology has to be adopted for thermal plants and all industrial sectors, Govt may consider Atmanirbhar Initiatives to progress this issue on a Mission mode, forming a consortium of Govt PSUs, Department of Science & Technology (DST) and Council of Scientific & Industrial Research (CSIR) labs. Govt must first come up with a national policy for CCS&U to set targets and provide policy direction to the industry. It is estimated that India may have over 300 billion tonnes of underground CO‚ storage capacity. The exploration and development of such basins must be taken up on priority with some pilot projects for storage to start with.

(h) Prioritise incentives and investments in future-ready technologies. The gas-based shaft furnace can switch to green hydrogen seamlessly while utilizing domestically produced green hydrogen instead of relying on imports of coal in the longer term. The gas-based technology has to be incentivised to avoid locking in coal-based capacity for the next 50-60 years.

(i) Support blending of biomass with coal in existing plants wherever feasible.

11. Creating Special Coastal Steel Economic Zones in the East Coast:
Considering the slow pace of private sector investments, despite corporate tax reductions/special reductions for new investments and very large investments required to raise capacity to 300MT, Govt may consider announcing Special Economic Zones (SEZs) on the East coast near Paradip, Vizag, etc. for megaprojects for green and value added steel and heavy plants building on the downstream side. Green Hydrogen production should also be planned with the creation of some offshore wind establishments, facilitating hybrid operation with solar power. FDI could be especially invited from Japan (with an ageing population), South Korea etc. As the nonavailability of high-grade steel scrap has been an important factor in our CER initiatives, some ship-wrecking yards can also be planned in this zone to increase steel scrap in the feedstock.

12. Focus on Value Added Steel Production & Atma Nirbhar Initiatives in R&D on Special steels: India has been lagging in these areas. The government announced a Performance Linked Incentive (PLI) scheme in July 2021 with an outlay of Rs 6,233Cr. 27 Companies participating in the PLI scheme have committed to an investment of Rs 29,530 crores for downstream capacity addition of 24.78 Million Tonne. The implementation may be hastened. Atmanirbhar initiatives in R&D on special steels will need to be strengthened.

13. Identifying Long-Term Shortages of Critical Raw Materials for Steel Production up to 2047:
(a) It is important to identify long-term shortages for timely forward action. Indian steel sector is disadvantaged due to limited availability of some of the essential raw materials such as high-grade lumpy manganese ore and chromite, coking coal (with present import dependency of 55 MT i.e., 80% annually), steel-grade limestone, refractory raw material, nickel and ferrous scrap. More exploration will have to be examined with Ministry of Mining which is progressing now in a big way for exploration of strategic minerals. One area of concern is long-term availability of good iron ore when targeted levels of 300 MT capacity is reached as there are apprehensions of depletion of good Haematite ores in the eastern sector by then. This issue needs to be examined and action taken for more exploration & mining. There are reserves of Magnesite in Western Ghats but mining has been affected due to environmental restrictions. The possibility of exploiting these reserves, with adequate safeguards may be examined. Some acquisitions of overseas mines in critical areas could be considered together with Ministry of Mining.

(b) For the immediate future, increase in iron ore mining and evacuation capacity to about 350 Million Tons Per Annum (MTPA) by 2030, from current levels and enhancing beneficiation including pelletisation facilities for low-grade ores will have to be hastened.

(c) In location of future steel hubs, new factors like availability of steel scrap, proximity to CO2 storage facilities or CO2 consumers. e.g., soda ash, plastic manufacturers, nearness to ports in western regions with proximity (as an option for near zero emission stages) to Middle East Noth Africa (MENA) region with prospects of future low-cost hydrogen supplies will have to be considered. Even processing of green DRI from MENA region through joint ventures can be considered.

14. Building Cost & Quality Competitiveness in Indian Steel Industry: Indian steel producers face stiff competition with dumping of steel attempted by China, Japan and South Korea. India internally suffers cost disadvantage of 100 Dollars per ton due to higher energy prices, taxation, Freight rates etc.

15. Breakup of Contributory Factors:
(a) Cost premium for steel production in India- Item Cost ($/ton) Logistics and Infrastructure (25-30), Power (8-12), Import Duty on Coal (5-7), GST compensation cess (2-4), Taxes And Duties on iron ore (8-12), finance (30-35), so total cost disadvantage 80-100 (source Niti Ayog). Iron ore royalties and levies which are around 20 percent, over and above GST should be either subsumed in GST or made Modvatable. This is particularly important for reducing cost for green steel production.

(b) There is a case for progressive reduction of the above costs for Indian steel to be globally competitive. There is also a need to develop conservative designs in steel use from the carbon emission angle. Considering stiff competition from China (ramping up steel production), Japan & South Korea on the export front and the imposition of CBAM by EU against non-green steel, the Govt needs to consider:
(i) Reduction of levies on inputs like iron ore, coke, etc. seeking some favourable status/quota for import of steel from India by USA & EU.
(ii) To hasten the small-scale sector (40% of total capacity) in steel also towards green initiatives, some incentives for measures for energy conservation/switch over to coal gasification, may be considered.
(iii) Steel industry be mandated to progressively work towards lower carbon emission norms, greater energy efficiency and conservation of natural resources.
(iv) Project costs are also increasing due to environmental/forest clearances, land acquisition delays etc. Apart from streamlining procedures in this regard, commencement of the main project should only be undertaken when bulk of these clearances are received. To reduce upfront cost of land and enable faster acquisition, the land pooling concept can be tried as successfully done in Andhra Pradesh etc. Special Purpose Vehicles (SPVs) of central and state agencies could be formed to acquire land, create the necessary infrastructure and then invite bids for the steel plants to expedite steel project execution.
(v) Prioritise the adoption of captive open-access renewable power by the steel industry. Even the existing steel plants have a total RE potential of 6 GW. Cost and structural issues with respect to the power grids must be sorted out on priority at least for the largest steel plants.

ELECTRONICS SECTOR
16. Govt Initiatives: To boost electronics manufacturing, including semiconductors and position India as a global hub for Electronics System Design and Manufacturing (ESDM) and compete globally, (in terms of the Vision of National Electronic Policy 2019), important steps taken by the Govt include:

17. Production Linked Incentive Scheme (PLI) for Largescale Electronics Manufacturing:
(a) This Scheme was notified on 01 April 2020. It aimed to provide an incentive of 4% to 6% to eligible companies on incremental sales (over base year), involved in mobile phone manufacturing and manufacturing of specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units, Surface Mount Technology (SMT) components, discrete semiconductor devices including transistors, diodes, thyristors, etc., passive components including resistors, capacitors, printed circuit boards (PCB), micro/nano electromechanical systems etc.

(b) By April 2022, a total of 32 beneficiaries had been approved under this scheme, of which 10 (five domestic and five global companies) were approved for mobile manufacturing. In the domestic segment, companies including Lava, Bhagwati (Micromax), Padget Electronics, UTL Neonics and Optimus Electronics and in the international segment (for products of invoice value Rs 15,000 and above) companies approved were Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron. Of these, 3 companies, namely Foxconn Hon Hai, Wistron and Pegatron are contract manufacturers of Apple iPhones. Apple and Samsung together account for nearly 60 percent of global sales revenue of mobile phones. Six companies approved under the Specified Electronic Components segment include AT&S, Ascent Circuits, Visicon, Walsin, Sahasra, and Neo Lync.

(c) PLI Scheme for Large Scale Electronics Manufacturing (LSEM) along with existing Phased Manufacturing Program (PMP) has led to increased value addition in the electronics sector and smartphone manufacturing, 23% and 20% respectively, from negligible level in 201415. Of the USD 101 billion total electronics production in FY 2022-23, smartphones constituted USD 44 Billion including USD 11 billion as export. It is expected that in 5 years the production level would reach USD 125 billion with 60% contribution to Exports. Ministry of Electronics and Information Technology (MeitY) need to be complimented for this effort.

18. PLI Scheme for IT Hardware:
(a) The first version of the IT hardware PLI scheme, launched in March 21 having an outlay of Rs 7,350 crores, with target segment covering (i) Laptops (ii) Tablets (iii) All-in-One PCs and (iv) Servers, received a lukewarm response from the companies. In the revised scheme, the Govt increased the duration of the scheme to six years with a provision to claim incentives in any of the six years, increased the incentive of the scheme to 5% from 2%, made investments flexible, allowed companies to even include investments made by their suppliers or contract manufacturers, and made provision for additional incentives of 3-4% if the companies use locally manufactured components.

(b) The Govt has now approved applications of 27 companies such as Dell, HP, Lenovo, and Foxconn among others, out of the 40 proposals it received under the Rs 17,000-crore IT hardware PLI Scheme 2.0. This will lead to an investment of Rs 3,000 Cr and additional production of Rs 3.5 trillion. 23 of these companies are in a position to start manufacturing from day one. Companies approved are Flextronics, Padget, Sojo, VVDN, Goodworth, Neo link etc.

19. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS):
(a) The scheme was initially notified on 01 April 2020, to provide financial incentive of 25 percent on capital expenditure for the identified list of electronic goods that comprise downstream value chain of electronic products, i.e., electronic components, semiconductor/display fabrication units, ATMP units, specialized sub-assemblies.

(b) To widen and deepen electronics manufacturing, the Union Cabinet in Dec, 2021, approved a comprehensive program with an outlay of Rs 76,000 crore for the development of Semiconductors and Display manufacturing ecosystem. With the approval of the Cabinet, this Programme was modified in Sep 2022, offering fiscal support of 50% of the project cost uniformly for semiconductor fabrication plants across technology nodes as well as for compound semiconductors, packaging and other semiconductor facilities.

(c) Considering the limited response to MeitY’s first round of applications, perhaps due to focus being on more cutting-edge technologies, like the expensive 28 nanometer (nm) semiconductor fabrication etc, and that India’s semi-conductor market at USD 27 Billion in 2021 is projected to reach 85 to 100 USD Billion by 2030 with heavy imports, the strategy was changed to encouraging mature modes (e.g., above 40nm) also. Keeping in view that competing countries were offering incentives, a fiscal incentive of 50% of the project cost was offered to all eligible participants. There will also be an exemption of basic custom duties on specified capital goods. A modified India Semicon program was launched on 1st June 2023 on the above criteria allowing first-round participants to modify their proposals and join.

(d) Micron Technology (who had responded from the first round onwards), announced in June 2023 that they would invest USD 825 million for an assembly/testing facility in Gujarat. Under the modified ATMP scheme, Micron will receive 50% of the project cost from the Central Govt and 20% from the Gujarat Govt.

20. Design Linked Incentive Scheme:
(a) It offers financial incentives, and design infrastructure support National Electronic Design Automation (NEDA) Grid, Intellectual Property (IP) Cores, Multi Project Wafer MPW Prototyping, Post silicon validation across various stages of development and deployment of semiconductor design for Integrated Chips (ICs), Chipsets, System on Chip (SoC), Systems & IP Cores and semiconductor-linked design. The scheme provides both a “Product Design Linked Incentive” and a “Deployment Linked Incentive” for startups/ Micro, Small and Medium Enterprises (MSMEs) and companies.

(b) Out of 33 applications received, 7 have been approved till now. 20% of Global Chip design is now carried out in India by global companies using its low-cost talent pool of researchers/Ph.D.’s. Along with the Semicon India program, the Chips to Start Up aims to train over 85,000 Engineers in ESDM disciplines in the next 5 years. There is a program also with Purdue University for the training of doctoral students focusing on products/solutions with increasing, indigenous semiconductor content, and identifying key/missing semiconductor IPs and blocks which incentivize their development will help.

21. Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme was notified on 01 Apr 2020, to provide support for the creation of world-class infrastructure along with common facilities and amenities, including Ready Built Factory (RBF) sheds/Plug and Play facilities for attracting major global electronics manufacturers along with their supply chains to set up units in the country.

22. Electronics Development Fund (EDF): EDF with a corpus of Rs 2,626 crore has been set up as a “Fund of Funds” to participate in professionally managed “Daughter Funds” which in turn will provide risk capital to startups and companies developing new technologies in the area of electronics and Information Technology (IT).

23. Phased Manufacturing Programme (PMP) has been notified to promote domestic value addition in mobile phones and their sub-assemblies/parts manufacturing. The manufacturing of mobile phones has been steadily moving from semi-knock-down to completely knocked down with 20% domestic value addition. The Budget 2015-16 introduced a differential Excise Duty for domestic mobile manufacturers. Under this, the Countervailing Duty (CVD) on imports at 12.5% and Excise Duty at 1% without input tax credit (or 12.5% with input tax credit) were given to domestic cell phone manufacturers. The differential duty approach has helped in increasing the local production of mobile handsets from 11 crore units valued at Rs 54,000 crore in 2015-16 to 17.5 crore units valued at Rs 90,000 crore in 2016-17.

24. Tariff Structure has been rationalized to promote domestic manufacturing of electronic goods, including, inter-alia, cellular mobile phones, televisions, electronic components, set-top boxes for TVs, Light Emitting Diode (LED) products, and medical electronics equipment.

25. Exemption from Basic Customs Duty on capital goods: Notified capital goods for the manufacture of specified electronic goods are permitted for import at “NIL” Basic Customs Duty.

26. Public Procurement (Preference to Make in India) Order 2017: In furtherance of the aforesaid Order, MeitY has notified a mechanism for calculating local content for 13 Electronic Products.

27. Recommendations:
(a) Considering that India is becoming a favoured destination for MNCs to set up their chip design centres, Govt needs to develop ready-tomove in Knowledge parks in University/Research establishment areas and offer some incentives to the MNCs. This will supplement the Designled initiative in creating a larger local talent pool.

(b) With the enactment of Chips Act 2021 in the US, it is looking to shoring up semiconductor fabrication in the USA. Opportunity exists for India to partner in some Chip Design activities as well as contribute to (low-end) chip fabrication especially if supply chain partners are the same. The education component of the Chips Act provides training for interns from friendly (Quad) countries in the USA. The Critical & Emerging Technology Cooperation between India and USA can also provide many opportunities. A unified approach, taking into account the above factors will help India. Developing a world-class joint prototype testing bed to validate innovative chip designs and setting up an R&D centre and test facility for the development of embedded systems and semiconductors could be proposed as part of Indi-USA joint initiatives.

(c) The present design-linked initiatives, besides covering areas under PLI may also include a component to address emerging areas including e.g., compound semiconductors, more heterogeneous integration using 3D technologies - chipsets, High Bandwidth Memory and Edge Artificial Intelligence (AI) chips, etc.

(d) There is a need for special monitoring for increasing local value addition progressively to 40-45%. Additional PLI schemes can be planned with a focus on value addition for units that reach their full production level in earlier PLI schemes. In future in PLI schemes, composite criteria both for production level reached and value addition increase can be evolved.

(e) In further phases of PLI, the manufacture of powerful/smaller nm chips may have to be focussed on to keep pace with technology advancements.

(f) Some planning may begin for the development of hardware for Quantum computers and Supercomputers, giving weightage to Atmanirbhar initiatives.

(g) India/s ultimate aim should be to develop into a provider of total products/solutions that serve the changing needs of the consumer/ markets to derive greater value for its efforts. In IT sector also, India will do well to focus on (software) product development for global needs, having reached a level of excellence in IT Services.

(h) While India’s intellectual property environment has shown signs of improvement in recent years, challenges remain regarding patent and copyright eligibility requirements that are outside of international standards, long patent pendency periods, expensive and time-consuming pre- and post-grant oppositions and excessive reporting requirements.

India ranked 42nd out of 55 countries assessed in the 2023 Global Intellectual Property (IP) Centre International IP Index. Making improvements in IP protection could in the long run attract more emerging technology foreign investments (needing strong IPR protection). (i) DST’s VAJRA scheme provides for the induction of foreign scientists (including NRI’s) in critical areas of technological development. This scheme can be utilized for Design linked incentive program.

BIOTECHNOLOGY SECTOR
28. National Bio-Technology Development Strategy 2021-2025: Department of Biotechnology (DBT).
(a) India is ranked amongst the top 12 biotech destinations in the world and ranks 3rd in Asia. At present, the biotechnology industry in India comprises of 3500 biotech start-ups and this number is estimated to reach 10,000 by 2024-25. The biotech sector is primarily divided into five major segments: Biopharmaceuticals, Bio-Services, Bio-Agriculture, Bio-Industrial, and Bioinformatics, which together contribute to the bioeconomy. Biotechnology industry growth in India is primarily driven by vaccines and recombinant therapeutics at present, quote, “With the current growth trajectory of the sector, we are confident that India will be within the top 5 countries globally and be recognized as a Global Biomanufacturing Hub by 2025, with the Sector growing exponentially to achieve a growth of $150 Billion” unquote. Department of Biotechnology (DBT).

(b) Recommendations: Considering the importance of Biotechnology (Biotech) especially in rural employment generation, it is recommended that more Biotech clusters be developed across different Agro-climatic zones in the country. In the Biopharmaceuticals sector, more centres of excellence for Biosimilars will need to be setup. In view of oil/gas/coal being depleting assets globally, Bioenergy and Biomass plantations (with a focus on plant species with high calorific value) will have to be encouraged in a large scale coordinated manner by DBT, Ministries of Forest/Urban Development. Biopesticides/Biofertilizers development will be another important area. To hasten the development of genetic engineering products, as regulatory mechanisms span across various ministries like Pharma, Health, etc. the Govt may consider an Apex controlling authority.

29. Bio Agriculture Under Climate Change and Rising Population Scenario:
(a) In the context of floods/droughts or both, the availability of agricultural land will get reduced and focus will need to be on increasing yield of crops. As temperature rise will affect wheat and other agricultural crop yields, evolving climate-resilient varieties will need to be prioritized. As the impact of climate change on rainfed areas will be substantial (up to 20%), special measures are needed. A state of art facility for research for Combating Climate Change/ Structural Genomics (Genome Sequencing) of Crop Plants to Identify and Utilize Novel Genes, Pathways, and Metabolites has been set up at its Nanaji Deshmukh Plant Phenomics Centre, Indian Council of Agricultural Research - Indian Agricultural Research Institute (ICAR-IARI), New Delhi.

(b) ICAR today has the World’s second-largest Gene Bank. It has developed a computational model for identifying genes responsive to six abiotic stresses: cold, drought, heat, light, oxidative, and salt.

(c) ICAR has successfully carried out genome sequencing to decode the structural genomic information of multiple crop plants and microbial strains in collaboration with other institutes or single-handedly. The important crops that are sequenced in collaboration are rice, wheat, tomato, mango, flax, jute, tea, and guar while the pigeon pea genome was sequenced exclusively in ICAR.

(d) Recommendations:

(i) A second green revolution is called for to cover the Eastern sector with its good availability of water, to enhance rice and sugarcane cultivation in view of the serious depletion of the groundwater table in Punjab, unsustainable cultivation of sugarcane in water-starved Maharashtra, Karnataka, and Tamil Nadu. The Green Revolution will also have to cover rainfed areas to increase the production of Millet, Pulses, Oil seeds Cotton etc bringing in more water conservation measures through drip irrigation.

(ii) In the interest of food security in the climate change context, time has come to encourage genetically modified crops. So far only GM cotton has been approved. For genetic improvement, substantial R&D funding is called for in gene technologies, genome editing, and synthetic biology to derive- input use efficiency, climate resilience, biotic stress resistance, quality, productivity and novel traits. There is also a need to strengthen Agricultural extension work through Krishi Vigyan Kendra’s (KVK).

30. Building Food and Agriculture Systems for a Green Future
(a) A recent McKinsey study on the above brings out that the world’s agri-food systems accounted for about 30 percent of human-caused global greenhouse-gas (GHG) emissions in 2019, making them a critical focus for meeting increasingly bold climate targets.

(b) One opportunity to meet climate targets while adding new revenue in agriculture is to remove carbon through regenerative agricultural practices such as planting cover crops. Such carbon removals could sequester 0.5 to 1.2 metric gigatons (Gt) of CO2 out of the 6.0 to 10.0 Gt of annual sequestration of CO2 needed by 2050. They can also help agriculture play a critical role in addressing other sustainability crises, such as biodiversity loss, nutrient pollution and freshwater consumption.

(c) Moving forward, significant shifts in global food systems are necessary to meet the world’s demand for food, fuel, and fibre without harming the planet—and innovation at scale is key.

(d) On the regulatory side are ambitious policy agendas; for example, the European Commission’s Farm to Fork Strategy, part of the European Green Deal, aims to make food systems “fair, healthy and environmentally friendly” by promoting organic farming and pushing for a 50 percent reduction in synthetic inputs.

(e) Fuelling the bio revolution e.g., the yields of US corn farmers are, three to four times those in India (with majority small farmers holding), and nearly twice those in China, developing alternative food e.g., plant protein in leave of animal meat etc will require examination.

31. Critical role of Biotechnology in Climate Change context and rising population trend in the Country: From issues and challenges brought out in the discussions above it is clear that more investments and thrust in biotech sector will enable India to face adversities and emerge successful. There is a need to develop an appropriate policy and implementation strategy/ Plan to foster high-performance biomanufacturing in the country including the following:
(a) To establish biomanufacturing hubs and Biofoundry infrastructure/ facilities in Public-Private Partnership (PPP) mode for promoting environmentally sustainable manufacturing.

(b) Promote research & innovation to address knowledge gaps, create novel biochemical processes and technology tools for development of high-value bio-based products.

(c) Enhanced industry participation in bridging the gaps (lab-tomarket) for pre-commercial pilot scale and scaling-up of bio-based products in the country.

(d) To address regulatory issues related to the strategic sectors, enhancing safety and quality but at the same time encouraging innovation and growth.

PHARMACEUTICALS SECTOR
32. Present Status: The industry is ranked 3rd globally in volume and 14th in terms of value, supplying around 10% of the total global production and around 20% of the total volume of global generics. India manufactures 30% of the world’s requirement of anti-HIV drugs and contributes substantially to global vaccine production. The industry is however quite fragmented and comprises nearly 10,500 units with the majority of them in the small sector though some big firms have emerged.

33. Govt Support to Pharma Research: Govt in Sep 2023 announced the Promotion of Research and Innovation in Pharma-MedTech sector (PRIP) scheme, for operation from FY24 to FY28, with plans-
(a) To invest Rs. 700 crore in creating seven centres of Excellence at various National Institutes of Pharmaceutical, Education and Research (NIPER) to boost research and innovation in the pharma and MedTech sector. (b) To provide Rs. 4,250 crore to support research in the private sector through milestone-based funding. The Centre may also acquire equity stakes of 5-10% in these private entities in exchange for the funding.

(c) Recommendations:
(i) Considering the large number of problems in drug trials etc there is a need for regulatory support to innovation, maintaining high standards of Quality and safety at the same time.
(ii) The Central Drugs Standard Control Organisation will need strengthening to bring it on par with the United States Food and Drug Administration (USFDA) to improve its inspection standards within India.
(iii) Some financial support from Govt to collaborative research by pharma units on study of foreign diseases will help. Increased funding to early-stage entrepreneurs, soft loan/interest subsidy to Small and Medium Enterprises (SMEs) and creation of Pharma Venture Capital Fund are needed. Technical assistance through the setting up of Formulation Development Centres will greatly help.

34. Prioritising R&D efforts on new Drug discoveries:
(a) While India’s Pharma growth story revolved around generics/offpatent drugs for a long, the time has now come to focus on new drug discoveries and advance to higher levels.

(b) There are opportunities in the Indian traditional medicine Ayur Veda system with more scientifically validated formulations appearing in the market besides giving wide support to traditional medicines. Attempts are progressing to analyse important herbal plants to isolate active components and progress studies, using modern medicine techniques, around the molecules e.g., curcumin from turmeric, and bacosides from Brahmi.

(c) Work on modern drug discovery is picking up with India emerging as one of the preferred destinations in Drug Discovery outsourcing/ contract research. Collaborative concept is also emerging with companies with strengths in different areas joining together.

(d) PPP models are also emerging with large pharma Companies setting up Research Foundations. Another interesting approach is for Public funded research taking over the basic research component of drug discovery in herbal medicines & the Pvt organizations to undertake clinical trials etc.

(e) Presently more than 100 new chemical entities are in different stages of clinical trials; a success story is the launch of Ligaplyn for type 2 Diabetes. Considerable progress is being made in the field of Biosimilars.

35. Govt initiatives:
(a) These include New Millenium Indian Technology Leadership Initiative (NMITLI) & Open-Source Drug Discovery (OSDD) of CSIR and the Bio-Tech Research Assistance Council/Bio-Tech Industry Partnership program (BIRAC/BIPP) by DBT to promote collaborative research between Public and private funded organizations. OSDD supports collaborative research in global partnership mode for Malaria, Tuberculosis etc. CSIR has contributed to some new drug discoveries e.g., “Saheli”, oral contraceptive pill, Prostalyn for Prostrate treatment etc. (b) In the above background, it may be seen India has a potential for new drug discovery and careful nurturing/supporting the subject is essential through additional funding for R&D in government research institutions as well as R&D in PPP models. The Govt can consider a cess on all pharmaceutical products going into a non-lapsable Pharma R&D fund.

36. Private sector contribution: A detailed review of private sector contribution to new drug discovery indicates that while considerable work is being done by large private pharma companies in this regard however, it is seen that in most cases, the work stops at the clinical stage and fails to reach the market. This issue requires deep study by expert groups for remedial actions. Also, investments by large private sector groups in new drug research form an insignificant percentage of their total R&D outlay. Most of the funds are allotted for R&D for the development of generic drugs. The possibility of differential R&D tax relief, more for new drug discoveries can be considered.

Drawing Inspiration from the Highly Successful Drug Discovery Models in the United States:
37. Cluster Development: The very successful Boston/San Francisco ecosystem for drug research emanates from cluster development of large number of medical schools, research centres and pharma industries. Ideas and breakthroughs from the medical schools are immediately tested in the form of clinical trials with the partnership of biotech companies that have mushroomed in these two cities. The concentration of leading institutions attracts top-tier talent in the fields of medicine, biology, and chemistry. The collaborative environment fosters innovation and knowledge exchange.

38. Studying Rare Diseases: Studying rare diseases in a country with a large and diverse population like India holds the potential to benefit a significant number of individuals, even though the diseases themselves may individually affect a small percentage of the population. Insights gained from studying a rare disease is often translated to the treatment of common diseases, to advance rare disease research in India, a three-fold strategy is proposed. Establish specialized research centres, integrate genomic medicine into healthcare practices for early identification, and implement a National Rare Disease Registry for effective data analysis and knowledge dissemination within the medical community.

39. Developing the Culture of Physician-Scientists and Strengthening Base of Clinical Development Scientists: Physician-scientists have been a crucial component of the U.S.’s success in drug discovery and medical research. Unfortunately, this culture is not as prevalent in India as USA and fostering it could significantly enhance the nation capabilities in drug discovery research. India needs an increased number of clinical development scientists and physician-scientists. However, traditional career paths prioritize patient care over research, resulting in a scarcity of clinical development scientists. There is a need to bridge the gap between clinical practice and research, undertake integrated training programs, set up research infrastructure in healthcare institutions and link appointments and promotions to research credentials.

40. Infrastructure Development and Technology Upgradation: Upgrade research infrastructure to meet international standards. Promote the adoption of AI and Machine Learning (ML) in drug discovery processes for faster translation. Reduction of bureaucracy in the whole process will help.

41. The New Drugs and Clinical Trials Rules 2019: These rules have set specific requirements for the Ethics Committee (EC) to follow before forwarding the report to the Central Licensing Authority (CLA). This document brings out changes related to the registration of clinical studies, biomedical and health research; responsibility of EC for clinical trial; maintenance of records by EC; suspension and cancellation of registration of EC, post-trial access of drugs, changes and clarity related to academic clinical trials etc and role of ECs in compensation and medical management process. The above is a welcome initiative. Benchmarking with best practices abroad in USA etc should enable India to raise its standards continuously.

42. “Clinical trial opportunities in India”. The recent study, “Clinical trial opportunities in India”, by the USA India Chamber of Commerce suggests that India has the potential to increase its global clinical trials (with contribution now only 3 percent) by five times in coming years, considering its large and diverse patient pool, talented workforce, cost-effective clinical trials and good progress in streamlining the regulatory processes. A greater focus on clinical trials, associated infrastructure and new drug development will help.

43. Support to Independent Investigative studies (IIS): Going beyond traditional clinical trials, IIS are led by independent researchers (supported by academic sponsors) with new approaches to Drug development to bring about new applications for existing drugs & innovative solutions for unmet medical needs. Considering the useful contribution this group can make, Govt can consider setting up some PPP model for support funds for this research category.

CREATING AN ENABLING ENVIRONMENT FOR GLOBAL MANUFACTURING HUBS
44. Improving Ease of Doing Business (EoDB).

(a) In the World Bank EoDB index India improved from 142 position in 2014 to 63rd in 2020 (39,000 compliances have been reduced and more than 3,400 legal provisions have been decriminalized). India ranked 40th on the latest world competitiveness ranking released by the International Institute for Management Development (with Ireland Rank 2 and Singapore 4). India retains 40th rank out of 132 economies in the Global Innovation Index 2023 (World Intellectual Property Organization). While the above progress is creditable, India should aspire to reach within top 10 Positions, benchmarking best practices with leading countries with New Zealand, Singapore and UK.

(b) Recommendations
(i) Concerns of MNCs regarding long-term Tax stability issues and contract Enforcement Delays will need to be addressed effectively. Institution of Special courts for Commercial claims have reduced settlement time from average around 1200 days to half i.e., 600 days. Institutions of special Divisions at High Court levels for FDI disputes may be considered.
(ii) Focus on Quality, Innovation, Productivity, Cost Leadership and Reducing Cost of Business (Capital, Land, Utility Services, Logistic costs) is essential for India to be globally competitive.
(iii) It is important to strengthen the IPR regime protection to attract FDI in emerging technologies and R&D units. While some protectionism is unavoidable in PLI initiatives in the incentive period, India must consider moving towards low import duty structure. India should join trade groups where there is potential to increase exports in the long run which foreign investors look for.