Norms to keep foreign investment flowing in the sector on the anvil
Ahead of the discussion on FDI in retail in Parliament slated to begin on December 4, Prime Minister Manmohan Singh is set to formalize the pharma FDI policy guidelines at a meeting on Monday (December 3).
Officials in the know of the development said prime minister was expected to approve a framework which will allow continuous flow of foreign investment into the sector with essential checks and balances.
The strategy would be to keep overseas players interested in India without compromising on the availability and price of critical medicines, they added.
The two important issues to be decided in the pharma FDI policy are the limit to which foreign companies will be allowed to acquire share in a domestic company, and the role of Competition Commission of India (CCI) in the mergers and acquisitions pertaining to the sector.
The issue caught government attention after the acquisition of big Indian companies which included Ranbaxy, Shanta Biotech and Piramal Health Care’s health unit, by the foreign companies.
The finance ministry now wants that only those cases involving FDI beyond 49 per cent in existing units should be considered by the Foreign Investment Promotion Board (FIPB). The commerce ministry is favouring all foreign investments in existing pharma units to be approved by the FIPB.
Prime minister Singh is expected to settle the issue in the meeting in consultation with finance minister P Chidambaram and commerce minister Anand Sharma.
The domestic industry has raised apprehensions that the entry of foreign players into the Indian market may adversely impact the availability of generic medicines as the overseas companies would push costly patented medicines. The concern has been shared by the commerce ministry also.
A ministerial group headed by the Prime Minister had put foreign investment in brownfield pharma on approval route in October last year.
For any merger or acquisition, the foreign companies have to seek permission from FIPB under the new norms which also calls for vetting of such deals after six months by CCI. For new projects, however, 100 per cent FDI under automatic route is still allowed.
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