In a bid to take a final view on relaxing foreign direct investment (FDI) norms in the pharma sector, Prime Minister Manmohan Singh is likely to soon call a meeting of senior ministers, including Finance Minister P. Chidambaram and Commerce and Industry Minister Anand Sharma.
Differences, mainly between the finance and the commerce and industry ministries, on how much FDI in existing domestic units must be approved by the Foreign Investment Promotion Board (FIPB), had led to a delay in relaxation of norms.
“The Prime Minister is likely to again meet the ministers concerned regarding finalisation of FDI policy,” an official told PTI.
The development comes in the wake of the Department of Industrial Policy and Promotion (DIPP) finalising guidelines after being asked by an inter-ministerial group headed by Additional Secretary in DEA Shaktikanta Das.
“DIPP has sent the final guidelines to the PMO. However, differences still persist on the issue of involvement of Competition Commission of India (CCI) in scrutinising mergers and acquisitions of Indian drug companies,” the official said.
Brownfield pharma
In October 2011, a ministerial group headed by Prime Minister Manmohan Singh had put foreign investment in brownfield pharma on approval route, changing a 10-year-old policy of automatic clearance.
Under it, for any merger or acquisition, the overseas investor will have to seek permission from FIPB. After six months, monopoly watchdog CCI will vet such deals. However, 100 per cent FDI under automatic route is allowed in new projects.
The issue of FDI in existing Indian pharma companies started attracting government’s attention after some foreign firms acquired big Indian companies such as Ranbaxy, Shanta Biotech and Piramal Health Care’s health unit. While the finance ministry wants that only those cases involving FDI beyond 49 per cent in existing units should be considered by FIPB, the DIPP wants any foreign investment in existing pharma units to be approved by the FIPB.
According to sources, DIPP and health ministry have also insisted that foreign companies acquiring Indian firms must seek government approval if they decide to reduce or stop manufacturing of essential drugs by the acquired entity.
Besides, the two ministries want that multinational companies acquiring Indian firms should not cut production of generic drugs under any circumstances.
