DIPP sticks to 49% FDI cap in brownfield pharma

Written by Kirtika Suneja | Jayati Ghose | New Delhi | Updated: Nov 7 2013, 10:13am hrs
The department of industrial policy and promotion (DIPP) is firm on restricting FDI in brownfield pharma to 49%, overturning the current regime where 100% FDI through an approval route is allowed in such cases. In its final note to the Cabinet, the department has reiterated its policy stance despite the finance ministry and Planning Commission opposing such additional curbs on FDI in existing pharma companies.

According to sources, the DIPP plans to go ahead with the draft note it had floated and send it to the Cabinet. DIPP is yet to receive any comments from the department of pharmaceuticals (DoP). However, a senior DoP official said that it was not mandatory for them to give its views.

DIPP, the sources said, would try to convince the finance ministry and Planning Commission that a 49% cap will not necessarily restrict FDI flows into the country.

The department argues that a stringent foreign investment policy in brownfield pharma (acquisition of stakes in existing companies) is necessary to enable people access to affordable medicines.

A DIPP official said: We gave them a fortnights time to comment on the note and the pharma department has not yet responded. So, we will go ahead and approach the Cabinet after which the Prime Ministers Office will take a call.

The DIPP had proposed that foreign buyers should not be allowed to enforce any non-compete clause, giving the existing promoter leeway to foray into the same line of business, a provision it feels can increase competition. Besides, the Cabinet note also seeks to bring down the FDI limit in companies making critical drugs to 49% and calls for putting foreign investment in such facilities on the approval route.

The market share of multi-national companies in the Indian pharma space is 25% and officials say that if four more domestic pharma majors get acquired, this would rise to a level of 40%.

The Standing Committee on commerce had said that foreign investments per se are not bad. The issue was not about promoting FDI... But to promote more investments... So that there is greater research, adequate availability of medicines and more competition which will ensure affordable and accessible medicines, the committee had said.