FIPB retains right to clear FDI in pharma

The Foreign Investment Promotion Board (FIPB) will continue to clear foreign direct investment proposals in the pharma sector till the Competition Act is amended to enable the Competition Commission of India (CCI) to vet such proposals. This would essentially mean that all brown-field projects in the pharma sector will now be cleared by the FIPB, as per the extant policy.

In a meeting held by Prime Minister Manmohan Singh, it was decided that "status quo" be maintained for the sector till the CCI gets the power to do so, sources said.

Though the health ministry and the Department of Industrial Policy and Promotion were of the opinion that all pharma projects — above and below 49 per cent FDI — should continue to be vetted by the FIPB, the Planning Commission was of the view that the CCI would be the apt authority to clear such projects. The finance ministry said that only those cases involving FDI beyond 49 per cent should be cleared by the FIPB.

Earlier, the PM had formed an inter-ministerial group (IMG) to resolve differences between various departments. The IMG submitted its report but was not accepted by the Commerce and Industry Ministry. The move will open up nearly $5 billion domestic pharmaceutical sector to investment from overseas. India ranks third in terms of production by volume.

The issue of FDI in Indian pharma companies started attracting government's attention after some Indian pharma companies were acquired by foreign firms. The domestic industry was apprehensive that the entry of foreign players in the Indian market may adversely impact the availability of generic medicines as the overseas companies would focus on costly patented medicines.

The IMG had put foreign investment in brownfield pharma on approval route in October last year. For greenfield projects, 100 per cent FDI through automatic route is allowed in India.

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