The Cabinet today deferred the consideration of proposals to relax foreign direct investment norms in the housing sector and to reduce the FDI cap to 49 per cent in critical areas of the pharma segment.

“The Commerce and Industry Ministry requested for the deferment of all the three proposals. Most likely, the Cabinet will take up these issues later this week,” an official said.

Several departments, including the Department of Industrial Policy and Promotion (DIPP), have raised concerns about Indian drug makers being acquired by global firms.

The DIPP has proposed reducing the FDI cap in “rare or critical pharma verticals” to 49 per cent from 100 per cent.

The department also proposed conditions for foreign firms such as mandatory investment in research and development and non-compete clauses in the shareholders pact.

The concern is that with MNCs taking control of Indian firms, there could be a reduction in the supply of vaccines, injectables, particularly for cancer and active pharmaceutical ingredients.

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

US—based Abbot Laboratories had acquired Piramal Health Care’s domestic business for $3.7 billion.

Currently, India permits 100 per cent FDI in the pharma sector through automatic approval route in new projects, while for existing pharma companies, it is allowed only after approval from the Foreign Investment Promotion Board.

In the housing sector, the DIPP has proposed relaxing FDI norms, including easing conditions for exit for foreign investors before the three—year lock—in period.

(This article was published on November 25, 2013)
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