Cabinet rejects industry dept proposal on FDI in pharma

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SummaryThe finance ministry had argued that such a move would discourage potential investors.

The government has decided to continue with the existing policy on foreign direct investment in the pharmaceutical sector and not implement the revised policy proposed by the industry ministry.

According to a statement issued by the government on Friday — a day after the Cabinet meeting — after considering the proposal of the commerce and industry ministry, it has been decided that the “current policy in brownfield and greenfield projects in the pharmaceutical sector will continue”.

However, an additional condition has been imposed that in all cases of FDI in brownfield pharma projects, there will be no non-compete clause in any of the inter se agreements.

The department of industrial policy and promotion (DIPP) had proposed capping the FDI in critical verticals of brownfield projects to 49 per cent while maintaining 100 per cent FDI in other projects through the approval route.

However, sources said that the move was strongly opposed by the finance ministry in the Cabinet meeting following which the proposal was rejected. The finance ministry had argued that such a move would discourage potential investors, especially at a time when the economy is going through a rough phase.

“We are not reducing (the FDI cap in brownfield pharmaceuticals projects) for the moment,” commerce minister Anand Sharma told reporters. However, he said that the FDI policy on pharma has a non-compete clause to safeguard interests of generic industry.

The DIPP had also proposed that 25 per cent of the total investment in the brownfield projects should be used in research and development activities. The health and industry ministry have been maintaining that in absence of such norms, the generic industry in the country would suffer, as evident by several takeovers and mergers by foreign firms in the recent years. DIPP data showed that over 95 per cent of FDI in the pharma sector between April 2012 and June 2013 was in brownfield or existing projects.

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