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‘Route buyouts of local pharma firms even below 49% via FIPB’

With commerce minister Anand Sharma taking a different tack from the finance ministry-led panel’s recommendation on foreign direct investment

Written by Shruti Srivastava | New Delhi |
August 8, 2012 12:55:58 am

With commerce minister Anand Sharma taking a different tack from the finance ministry-led panel’s recommendation on foreign direct investment (FDI) in brownfield pharma sector,there will be another round of inter-ministerial discussions this week.

The differences are significant as it involves opening up of the nearly $5 billion domestic pharmaceutical sector to investment from overseas. It ranks third in terms of production,by volume.

An inter-ministerial group (IMG) on the sector has recommended that the foreign investment promotion board (FIPB) should vet all proposals involving buy outs of domestic pharma companies for above 49 per cent inflow and subject them to standard conditions like the level of research and development and production levels of publicly needed medicines. But the industrial policy department under Sharma has suggested a lower cap of 49 per cent for all manner of foreign investment. The differences have remained even after the group has sent in its report to the Prime Minister’s Office.

When contacted by The Indian Express,Sharma refused to comment. Consequently the secretaries of the departments of economic affairs and industrial policy and promotion,Arvind Mayaram and Saurabh Chandra,are slotted to resolve the differences now,an official said. The move has taken the government by surprise as the matter of FDI cap was considered settled after the intervention by Prime Minister Manmohan Singh in November last year. Singh had moved in after quite a few Indian pharma companies sold out to foreign firms raising concerns whether medicines in India would become unaffordable for the lower income groups as a result.

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The IMG in its report has suggested that FIPB should approve a proposal of brownfield investment only when the multinational firm buying more than 49 per cent stakes in the Indian pharma company will have to increase the level of investment in R&D by 5 per cent each year. Secondly,the company will also have to ensure that quantity of drugs listed under National List of Essential Medicines should increase by 5 per cent each year and not fall below the last 5 year average. With these riders satisfied,the FIPB may clear FDI proposals in the sector,the IMG proposed.

CAP OF CONTENTION

* IMG says only buyouts of more than 49% be routed through FIPB

* Dept of Industrial Policy (DIPP) for FIPB route for all stake acquisitions

* Matter to be resolved at a meeting of DEA and DIPP secretaries

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