Pharmaceutical industry today criticised the government's decision to make it mandatory for all foreign investments in existing domestic pharma firms to be cleared by the FIPB.
Reacting against the decision, Biocon Chairman and Managing Director Kiran Mazumdar Shaw tweeted: "FIPB approval for any level of FDI in pharma sector is a retrograde step."
She said while the need for FIPB approval in FDI of over 49 per cent in existing Indian companies was understandable, but not for those cases below it.
Not impressed with PM's decision, she added. Expressing concern over the decision, Indian Pharmaceutical Alliance Secretary General DG Shah told PTI:"This will lead to a situation where it will become less attractive for acquisitions in India."
The government has decided that unlimited acquisitions is not beneficial for the nation, he added.
Presenting a different perspective, Organisation of Pharmaceutical Producers of India (OPPI) President Ranjit Shahani, said: "As long as there is no delay in the approvals, it is fine. A large number of projects were held back earlier. Now this condition should not be there."
Yesterday, the government decided that all foreign investments in existing domestic pharma firms should be allowed only after clearance by the FIPB, amid mounting concerns over availability of affordable essential drugs in the wake of multinationals acquiring local companies.
The decision was taken at a high level meeting chaired by Prime Minister Manmohan Singh that was attended by Finance Minister P Chidambaram, Commerce and Industry Minister Anand Sharma and Health Minister Ghulam Nabi Azad, among others.
Any foreign company acquiring an Indian firm, which had been producing essential medicines, would have to continue to do so till the time the Competition Commission of India was empowered to vet such deals.
It is also understood that although the amendment to the Competition Act 2002 was approved by the Cabinet in October this year, the government is checking the legality of inserting new sectoral specific clauses in the Act so that the CCI could direct foreign firms to produce a specific quantity of essential medicines after acquiring an Indian company.
The issue of FDI in existing Indian pharma companies started attracting government's attention after some foreign firms acquired big Indian companies such as Ranbaxy, Shanta Biotech and Piramal Health Care's health unit.