The Foreign Investment Promotion Board (FIPB) route for FDI proposals from the pharma sector may be here to stay for a much longer period than the preparatory time of six months that the prime minister has given to the Competition Commission of India (CCI) to take on its new role as a filter, if sources in the commerce ministry are to be believed.
This is creating unease among the pharma MNCs, which have long maintained that they prefer a CCI scrutiny to the FIPB option. They feel policy uncertainities such as these may deter foreign investors from firming up decisions to pump in resources in India.
Sources in the Department of Industrial Policy and Promotion (DIPP) indicate the six months period given to CCI to get ready to vet pharma deals is clearly a conservative estimate and this duration of FIPB check may drag on for well beyond 20 months.
?Various amendments to the Competition Act would have be made before CCI can actually start functioning as a filter and the current political scenario does not appear conducive enough for these legislative changes to come through so quickly. Also, CCI would need to brace itself with additional resources if such a task needs to be performed by it. In that light, it is highly unlikely that this would fall into place in the stipulated period,? the DIPP source added.
A clear framework also needs to be put in place before the CCI filter for pharma deals is institutionalised. ?We expect that the new system will be put in place within a period of six months and note that as an interim measure, all brownfield pharma M&A proposals will be routed through FIPB for a period not exceeding six months,? said Tapan Ray, director general, Organisation of Pharmaceutical Producers of India, an industry body representing multinational pharma firms in the country.
Pfizer India?s managing director Kewal Handa has already expressed his concerns on the matter. ?Ideally, the competition commission should have looked into it and framed the guidelines for M&As in the pharma sector. Going back to the FIPB route is a retrograde step. This will add to uncertainty, which will defer foreign investors? decisions to invest in India,? Handa had said immediately after the government announced its decision on pharma FDI early this month.
?Complete details of the ?Maira Committee Report? are not known to us as yet. The key recommendation, as reported by the Press, is the relaxation of the threshold limits of CCI scrutiny for pharmaceutical M&As. It is good to know that the CCI will now be further strengthened and will set up a standing advisory committee especially to look into M&As in the pharmaceutical sector of India to address all concerns of the stakeholders on the subject,? said Ray.
