Anand Sharma for meet to review FDI in pharma

The Commerce Ministry is concerned that an overwhelming majority of FDI in pharma is coming only in existing units

Expressing concern on the impact of the prevailing foreign direct investment (FDI) policy for existing investments in the pharmaceutical sector, Commerce Minister Anand Sharma urged Prime Minister (PM) Manmohan Singh to convene a high-level review meeting to deliberate on the matter.      

"FDI in pharma has neither proved an additionality in terms of creation of production facilities nor has it strengthened the research and development in the country. These facts make a compelling case for revisiting the FDI policy," Sharma said in a letter addressed to the PM.     

"I would urge the PM to call an urgent high-level review meeting, with finance, health, pharmaceutical minister and the undersigned (myself) to deliberate on the matter," he said.

Apparently, the commerce ministry is concerned about the fact that an overwhelming majority of foreign direct investment in pharma is coming only in existing units.      

"In case the FDI policy continues, then our domestic capability will gradually wither away. In that eventuality, India would be compelled to be dependent for life-saving medicines either on domestic facilities of multinationals or on imports," Sharma said.

Production of many critical drugs and medicines has been lost and India is import-dependent for intermediates and vital drugs such as penicillin, a matter of concern, he said.      

According to RBI data, between April 2012 and April 2013, as much as USD 989 million FDI was received in brownfield investment, and a mere USD 87.3 million in the greenfield investments.      

"Clearly, most of the FDI in pharma during this period has been brownfield, thereby merely a substitution of domestic capital by foreign capital rather than an additionality," Sharma said.      

The Department of Industrial Policy and Promotion (DIPP) had earlier this month raised concerns over spate of acquisitions of domestic pharma firms by multinationals.      

"More than 90 per cent of the FDI is coming in the brownfield pharma. There must be some reason why FDI is not coming in new projects. Is it giving the desired outcome of the policy. Whether they meet public concern," DIPP Secretary Saurabh Chandra had said.     

The current policy says that 'government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting approval'.     Currently, India permits 100 per cent FDI in pharmaceutical sector through automatic approval route in the new projects but the foreign investment in the existing pharmaceutical companies are allowed only through FIPB's approval.