The government, on Monday, decided that all foreign investments in existing domestic pharma firms should be allowed only after clearance by the Foreign Investment Promotion Board (FIPB), amid mounting concerns over availability of affordable essential drugs in the wake of multinationals acquiring local companies.
According to sources, the decision was taken at a high-level meeting chaired by Prime Minister Manmohan Singh. The meeting was attended by Finance Minister P. Chidambaram, Commerce and Industry Minister Anand Sharma and Health Minister Ghulam Nabi Azad, among others.
“Every proposal for foreign investment in existing Indian pharmaceutical companies will go to the FIPB till the time the Competition Act is amended,” a source said.
The source further said that any foreign company acquiring an Indian firm, which had been producing essential medicines, would have to continue to do so till the time the Competition Commission of India was empowered to vet such deals.
“Whosoever acquires an Indian firm producing essential drugs will have to continue to manufacture it till the CCI is empowered to take a view on such mergers and acquisitions,” the source added.
It is also understood that although the amendment to the Competition Act, 2002, was approved by the Cabinet in October, the government is checking the legality of inserting new sectoral specific clauses in the Act so that the CCI could direct foreign firms to produce a specific quantity of essential medicines after acquiring an Indian company.
“Moreover, it is also being examined whether the threshold limit for foreign investment in brownfield projects that would require CCI clearance should be revised from the existing about Rs.750 crore limit,” another source said.
Differences, mainly between finance and commerce and industry ministries, on how much FDI in existing domestic units must be approved by the FIPB, had led to a delay in relaxation of foreign investment norms in the pharma sector.
While the Finance Ministry has been in favour of allowing up to 49 per cent FDI in pharma companies through the automatic route, the Commerce and Industry Ministry along with the Health Ministry wanted all sorts of foreign investment in existing companies to be approved by the FIPB.