DIPP plans alternate FDI policy for pharma sector
Even as the FIPB is scheduled to take up 10 investment proposals in the pharma sector during this week, the industry ministry is considering an “alternate policy” for FDI in the pharmaceutical sector. Earlier, a few weeks ago, the ministry had asked the foreign investment promotion board (FIPB) not to clear any brown-field pharma FDI proposals till it finalises norms for foreign investors in the sector.
A senior official told The Indian Express that despite several discussions over the issue, concerns of the industry ministry have not been addressed.
In fact, even the inter-ministerial group (IMG), which was formed in 2011 to resolve the issue of foreign investment in brown-field proposals was although not accepted by the Department of Industrial Policy and Promotion (DIPP), the FIPB had started clearing pharma proposals based on the recommendations of the IMG.
“What we are considering is an alternate policy to the existing one. The options include that even after the foreign investment, the company should be Indian owned, Indian controlled, the foreign company should mandatorily invest in research and development,” the official said.
Discussions have been going on between the finance ministry and the DIPP on the definition of control as well. According to the draft Cabinet note, it has been agreed to adopt the definition provided in the Companies Bill with certain changes. According to the proposed definition, control “includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements”.
The FIPB is slated to meet on July 5. The official said that “some decision is likely to be taken before that”. Commerce minister Anand Sharma is likely to discuss it with the health and finance ministry before the meeting, the official said adding that the DIPP will also propose keeping the FDI limit to 49 per cent in brown-field projects. As per the extant policy, 100 per cent FDI is allowed in green-field pharma projects through automatic route while in brown-field projects it is through approval route.
Earlier, after quite a few Indian pharma companies sold out to foreign firms raising concerns whether medicines in India would become unaffordable, Prime Minister Manmohan Singh constituted the IMG. The IMG had suggested that the FIPB should approve a proposal of brown-field investment only when the MNC buying more than 49 per cent stakes in an Indian pharma company, increases the level of investment in R&D by 5 per cent each year. Secondly, such a 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.
