Govt rejects proposal to cut FDI cap in pharma firms

This demand was strongly opposed by the Finance Ministry. Planning Commission also has reservation on the proposal. On the other hand,Ministries such as Health and Family Welfare had supported the proposal.

“The Cabinet decided that the current policy in brownfield (existing firms) and greenfield (new) projects in the pharmaceutical sector will continue subject to the additional condition that in all cases of FDI in brownfield pharma,there will not be any non-compete clause in any of the …agreements,” an official statement said.

Currently,100 per cent FDI is permitted in brownfield pharma firms through clearance from the Foreign Investment Promotion Board (FIPB).

The non-compete clause prevents the acquired entity from producing similar products made by the acquirer would be done away with.

According to sources,many of the other proposed conditions,which aimed at tightening of the FDI policy,were rejected in the yesterday’s meeting.

The DIPP has proposed incorporating conditions for foreign firms like mandatory investment in R&D.

The department has proposed these conditions against the backdrop of unabated takeovers of Indian pharma companies and facilities by multi-national corporations (MNCs).

They have raised serious concerns that the continuous takeover would reduce availability of drugs at affordable prices to the general public.

From November 2011 to July 2013,as many as 74 pharma sector proposals were approved by the FIPB.

Over 95 per cent of FDI in the pharma sector between April 2012 and June 2013 was in brownfield or existing projects. India received USD 2 billion of FDI in the sector during this period.

In 2008,Japanese firm Daiichi Sankyo had bought out the country’s largest drug maker Ranbaxy for USD 4.6 billion.

US-based Abbot Laboratories had acquired Piramal Health Care’s domestic business for USD 3.7 billion. Another US company Mylan bought Matrix Lab while Dabur Pharma was acquired by Singapore¿s Fresenius and France’s Sanofi Aventis purchased Shanta Biotech. US-based Hospira acquired certain assets of Orchid Chemicals.

Meanwhile,the Union Cabinet yesterday also approved an exemption to exporters having Import Export Code (IEC) issued by the Directorate General of Foreign Trade from the purview of stock holding limits under the Essential Commodities Act,1955 with respect to edible oilseeds,edible oils and rice.

“This will help exporters benefit from economies of scale and bigger operation for optimally meeting export demands on a long-term basis,” the official statement said.

However,it said that exemption would be subject to a condition.

“If a wholesaler or retailer or dealer having IEC issued by DGFT is able to demonstrate that whole or part of his or her stocks in respect of edible oil,edible oilseeds and rice are meant for exports,then the stocks meant for exports shall be excluded for the purpose of calculation of stock limits,” it added.