Commerce Ministry firm on limiting FDI in existing pharma projects

Amiti Sen New Delhi | Updated on November 08, 2013 Published on November 08, 2013

Cabinet note from DIPP to include concerns raised by Plan panel, FinMin

The Commerce & Industry Ministry has decided to go ahead with its proposal to restrict foreign direct investment (FDI) in existing pharmaceutical ventures despite objections from the Finance Ministry and the Planning Commission.

In its final note to be submitted to the Cabinet for approval soon, the Department of Industrial Policy & Promotion will incorporate all objections raised on the proposal and give its comment , a DIPP official told Business Line.

The DIPP wants to cap FDI in brownfield projects below 49 per cent in “critical” sectors such as oncology medicines and vaccines to ensure continued availability of generics (copies of off-patent medicines) at affordable prices.

It also suggested that foreign investors be mandated to create at least 25 per cent additional capacity and generate additional employment in the critical pharma projects they invest in.


The Finance Ministry and the Planning Commission are of the opinion that it was not good to reverse the existing FDI policy as it would serve as a disincentive for foreign investors. The current FDI policy allows 100 per cent foreign investment in the pharmaceutical sector. While investments in greenfield projects are automatic, those in brownfield or existing projects have to be routed through the Foreign Investment Promotion Board (FIPB).

The Planning Commission, in its comments on the draft Cabinet note circulated by the DIPP, further argued that there was no evidence of rise in prices over the last few years under the existing policy.

“Our proposal for restricting FDI in existing pharma projects is based on evidence and experience. We will leave the ultimate decision to the Cabinet and the Prime Minister’s Office,” the official said.

The DIPP, in an earlier note, had pointed out that most of the FDI that has come into the pharma sector in the country has come in brownfield pharma and if it is allowed to continue then the existing facilities in the country that produce cheap life-saving medicines would completely be taken over.

It had also given a detailed presentation to Planning Commission Deputy Chairman Montek Singh Ahluwalia on the issue recently, hoping to win him over. The Science & Technology Ministry, which has supported the DIPP’s move, has expressed concern that takeover of Indian pharmaceutical companies by foreign investors could lead to a waste of Government efforts, research and resources as many of these companies sourced their technologies from Government laboratories under the CSIR.

The Health Ministry, too, supports the DIPP proposal to cap FDI in pharma.

Despite objections raised by the DIPP, the FIPB has been steadily clearing FDI proposals in existing pharma projects. It recently approved US-based Mylan’s proposal to acquire Indian generic manufacturer Agilla for Rs 5,168 crore.

Published on November 08, 2013
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