The inter-Ministerial Expert Group formed by the Finance Ministry to decide foreign direct Investment (FDI) in pharmaceutical sector will meet here on Tuesday to give a final touch to its suggestions which include government role in guiding foreign direct investment (FDI) in pharmaceutical sector and retaining a cap of 49 per cent FDI in pharma through the automatic route.

The Expert Group headed by Shaktikanta Das, Additional Secretary in the Department of Economic Affairs, will hold consultations before finalising its report for submission to the Finance Ministry for further action. The issue has raised hackles as both the Ministry of Commerce and Industry and the Health and Family Welfare Industry are at loggerheads over the norms for allowing FDI in pharma sector and also how to deal with the issue of acquisition and mergers of domestic companies by leading multinational drug firms and ensuring availability of cheap drugs.

It is learnt the Expert Group is of the view that government had a role to play in the acquisition and merger in the pharmaceutical sector and any proposal beyond the 49 per cent FDI threshold should be routed through the Foreign Investment Promotion Board (FIPB). It has subsequently rejected the view of Competition Commission of India (CCI) that it alone was competent to handle the process of due diligence, sources in the Industry Minister said here.

The expert group includes representatives of Department of Industrial Policy and Promotion (DIPP), Ministry of Health and Family Welfare, Ministry of External Affairs, Ministry of Commerce and Department of Pharmaceuticals, Ministry of Overseas Indian Affairs.

Recently the Prime Minister’s Office (PMO) had sought a status report on the policy for FDI in pharmaceutical sector stating it was worried over the continued delay in giving a shape to a new document. In November last, the government had revised the policy in respect of existing drug firms by making it mandatory for them to seek FIPB approval. Prior to this, foreign investments in the drug sector went through the so-called automatic route and foreign companies were allowed to invest 100 per cent in Indian companies.

However, concerned over the spree of acquisitions of Indian pharmaceutical companies by foreign pharma companies, the government had decided to bring in a new set of policies to ensure that pharmaceutical sector is not controlled by foreign companies thereby denying availability of cheaper drugs in the domestic market.

Sources said the Health and Family Welfare Ministry continues to stick to its stand that of imposing riders as a pre-condition for allowing FDI in the pharma brownfield projects. The Department of Health has made some very stringent proposals including that the FDI inducted company must increase R&D spend by five percentage points within three years of getting FDI nod. Similarly, it has said that the level of generic drugs should not go down below the last five year average.