The Department of Pharmaceuticals has called for medical device manufacturers to shift from simple assembly toward deeper domestic component production. The government is also reviewing the ₹3,420 crore Production Linked Incentive (PLI) scheme, aiming to address hurdles that have prevented many companies from claiming their incentives.
On Friday, August 21, 2026, the Department of Pharmaceuticals urged the medical devices industry to intensify its focus on domestic manufacturing. During the CII Global MedTech Summit, Secretary Manoj Joshi stated that while the industry has moved toward domestic assembly over the last several years, many current facilities function primarily as assembly lines rather than deep-manufacturing units.
The government is setting a clear goal for companies to increase their local value addition to 40-45%. This move is intended to build a stronger supply chain and reduce the reliance on imported components, which often leave companies vulnerable to global supply chain disruptions and currency fluctuations.
Challenges with the PLI Scheme
A critical part of this initiative involves the Production Linked Incentive (PLI) scheme for medical devices. The government has allocated ₹3,420 crore for the period from FY23 to FY27, which provides a 5% incentive on incremental sales. However, Secretary Joshi acknowledged that many participating companies have not been able to claim these benefits due to operational hurdles or difficulties in meeting strict initial requirements.
The administration is now actively seeking feedback from the industry to resolve these issues. This could potentially involve extending the timelines for the scheme or adjusting the operational criteria. The government expressed openness to refining the framework to ensure that companies that have invested in capacity can actually benefit from the incentives.
The Shift from Assembly to Manufacturing
For investors, the distinction between assembly and component manufacturing is important. Simple assembly operations often carry lower profit margins and require less capital, but they provide less competitive advantage. In contrast, deep component manufacturing—such as producing critical sensors, X-ray tubes, or detectors domestically—represents a higher level of complexity. While this transition requires significant money spent on expansion and new technology, it could eventually lead to better profit margins and more sustainable business growth.
However, this shift comes with challenges. The industry currently faces pressure from price caps on certain essential devices, such as stents, which can limit the ability to absorb higher manufacturing costs. Additionally, there is a continued dependency on imported high-tech components, which remains a hurdle for achieving the 40-45% value-addition target. Small and emerging companies may also face higher compliance costs as they attempt to scale up operations to meet these new expectations.
What Investors Should Track
The next important update to monitor will be any formal amendments to the PLI scheme rules or extensions to the project timelines. These changes will directly affect how much cash flow companies can recover from their past investments. Investors should also watch for company commentary regarding their ability to shift toward component manufacturing, as this will determine their long-term ability to compete in a market where the government is increasingly favoring high local content.