Finance minister P Chidambaram and commerce minister Anand Sharma are expected to hold a meeting with Prime Minister Manmohan Singh to discuss issues related to foreign investment in Indian companies making critical life-saving drugs and finalise the policy within a week.
Earlier, Sharma and the department of industrial policy and promotion (DIPP) argued that allowing multinationals to takeover domestic drug firms would deny Indians' access to affordable medicines.
US drug major Mylan Inc's R5,168-crore takeover of Agila Specialties, the injectable division of Bangalore-headquartered Strides Arcolab, is one of the main proposals to be kept on hold for over five months due to the commerce ministry's objections. Another proposal by Indore based-Symbiotec Pharmalab to sell 25% stake to private equity fund Actis for around R 330 crore has also been put in abeyance till DIPP finalizes policy on FDI in brownfield pharma projects involving transfer of control.
Chidambaram said on Monday that the pharma FDI policy was clear (insofar as it allows 100% FDI in both greenfield and brownfield), adding that the commerce ministry's concerns on some brownfield FDI proposals that have hence been put in abeyance would be addressed soon at the PMO meeting.
Founded by Anil Satwani, Symbiotec is a cortico-steroids bulk drug manufacturer. According to sources, the company is expected to use the capital to strengthen its R&D, build new plants and expand its product portfolio. Earlier, Sharma in a letter to PM had said: FDI in pharma has neither proved an additionality in terms of creation of production facilities nor has it strengthened the research and development in the country.
However, in a recent presentation to DIPP, Mylan states that once its proposal to acquire Agila Specialties is accepted, it will increase domestic sales 12-fold by 2018, increase Agilas capacity from 180 million units currently to 600 million units by 2017 and plans to become one of the biggest local suppliers of injectables in the country.
The proposal on non-resident transfer of shares between the foreign promoter group companies Castleton Investment, Mauritius and GlaxoSmithKline, Singapore in the Indian unit of GlaxoSmithKline has also been put on hold.
The commerce ministry is concerned that an overwhelming majority of foreign direct investment in pharma is coming only in existing units. According to RBI data, between April 2012 and April 2013, around $989 million FDI was received in brownfield pharma projects, while a mere $87.3 million went into greenfield projects.
India had opened pharmaceutical sector to 100% FDI via the automatic approval route in 2002, however, last year it made a distinction between greenfield and brownfield projects whereby government approval is essential for any investment in existing drug companies.