Status quo in policy till Competition Commission Act is changed
The present policy of taking approval for every proposal of foreign direct investment (FDI) in existing pharmaceutical projects will continue for the time being.
FDI in pharmaceutical was discussed at a meeting called by Prime Minister Manmohan Singh, which was attended by the Finance Minister, P. Chidambaram, and the Commerce and Industries Minister, Anand Sharma, among others.
The inter-ministerial group earlier recommended that any proposal for more than 49 per cent FDI needs to be approved by the Foreign Investment and Promotion Board (FIPB). It is believed that this recommendation has been rejected.
A senior Commerce and Industry Ministry official said, “Each and every brown-field (existing) proposal will require approval from the FIPB till amendments to the Competition Commission of India (CCI) Act are approved.”
At present, 100 per cent FDI is permitted in the pharmaceutical sector. It is automatic for greenfield (new) projects while Government (FIPB) approval is required for brownfield projects. The Press Note Number 3, issued last November, mentioned that the policy would be reviewed after a period of six months.
However, this review provision led to differences between the Finance Ministry and the Commerce and Industry Ministries.
While the former was in favour of only taking FDI proposals beyond 49 per cent to FIPB, the latter suggested that all foreign investment in existing pharmaceutical units be approved by the FIPB.
The differences created confusion with regard to new proposals in brownfield projects.
There was a feeling that this was sending a wrong signal to foreign investors, which is why the Prime Minister called a meeting to sort out the differences.
The Prime Minister’s Office intends to push FDI in the sector, which is worth Rs 1-lakh crore. Sources said the meeting was also an effort to expedite the implementation of 100 per cent FDI.
As soon as a final consensus emerges, the matter will be taken to the Cabinet for the final decision.