With rising demand from the pharmaceutical industry to put a cap on foreign direct investment (FDI), the government on Thursday announced its decision to form an inter-ministerial group to

examine the issue.

The decision to form the group, which will be headed by Planning Commission member Arun Maira, was taken by Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Manmohan Singh, Department of Industrial Policy and Promotion (DIPP) Secretary, R.P. Singh told reporters here.

“The group is about to be formed. The decision was taken in the CCEA meeting chaired by the Prime Minister one and a half months back,” Mr. Singh said. The government permits 100 per cent foreign direct

investment (FDI) via automatic route.

Mr. Singh said that for brown field investments, 100 per cent FDI should be permitted but through the approval route. However, concerns were raised by the local industry and Health Ministry over six

takeovers of big Indian pharma companies by global drug majors. The big takeovers included acquisition of the country's largest drug maker Ranbaxy by Japanese firm Daiichi Sankyo for $4.6 billion in 2008. Last year U.S.-based Abbot Laboratories acquired Piramal Health Care’s domestic formulations business for $3.7 billion.

The DIPP had also raised concerns over the growing dominance of multinationals in the sector. The department in its discussion paper on pharma sector, has proposed to cap FDI to 49 per cent.

On the proposed national manufacturing policy, Mr. Singh said, “We find everyone opposing it. We are just sleeping over the matter. If they will be silent on the issue, I don't think future is really bright for us,’’ he remarked. The draft policy suggested that industries in National Manufacturing Investment Zones (NMIZs) – big enclaves which could even subsume special economic zones - should be given flexibilities to downsize labour. Likewise, the draft suggested changes in the environment laws which come in the way of investment.