FIPB to approve foreign investments in pharma sector
The nodal body responsible for approving foreign investments that require government approval would continue to clear foreign acquisitions in pharma.
The decision was arrived at a meeting called by prime minister Manmohan Singh on Monday to end the deadlock on the issue between finance and commerce and industry ministries, two officials privy to developments told ET.
Finance minister P Chidambaram and commerce, industry minister Anand Sharma and health minister Ghulam Nabi Azad attended the meeting. Foreign Investment Promotion Board (FIPB) will decide on foreign investment proposals till the time competition law is amended, one official said.
The law ministry will examine if the conditions agreed through inter-ministerial consultations to protect interests of Indian consumer can be incorporated in the competition law, the second official said.
The government had in October last year said all foreign acquisitions in the pharmaceuticals sector would require FIPB approval, changing a 10-yearold policy that had all investment in the sector on the automatic route.
The tighter policy came after health ministry, some parliamentarians, NGOs and section of the industry expressed fears that the spate of buyouts of Indian drug companies by multinationals in recent years could undermine public health by reducing availability of low-cost medicines for Indians.
Daiichi Sankyo had purchase of Ranbaxy while Abbott took over domestic formulation business of Piramal Healthcare and Shanta Biotech was acquired by Sanofi Aventis of France.
All greenfield investments were left on the automatic route. It was decided that FIPB would clear pharma sector proposals for six months, but after that the jurisdiction would go to the Competition Commission of India once enabling changes in the competition law are made.
This led to a logjam as FIPB did not have the detailed rules that could be followed while clearing brownfield pharma FDI proposals to ensure public health interests were protected.
An inter-ministerial group headed by additional secretary in DEA Shaktikanta Das was set up to frame the rules after which FIPB clearedRs 3,000 crore worth of investment proposals last month.
The panel suggested conditions such as commitment by the foreign investor to manufacture and make available essential drugs post acquisition for five years and also to increase R&D expenditure by 5% for diseases prevalent in India.
The detailed guidelines were not notified because of differences between the ministries involved. The finance ministry wanted that only proposals involving more than 49% FDI should go to FIPB.
The department of industrial policy and promotion, the nodal body for FDI policy, and health ministry wanted that all brownfield proposals should require FIPB nod. Prime minister had to step in to resolve the impasse.