PMO seeks legal opinion on pharma FDI issue

Written by Soma Das | New Delhi | Updated: Jun 25 2012, 06:48am hrs
The Prime Ministers Office (PMO) has sought a legal opinion on whether the Competition Commission of India (CCI) can have the mandate of clearing or halting approvals of proposed brownfield pharma FDI deals on the grounds of public health. In a recent letter sent to the law ministry, the PMO has sought its views on the matter. This comes after the multiple arms of government - ministry of health and ministry of commerce and industry as well as a section of the domestic industry - put up sustained resistance to an earlier decision taken in October last year to empower the CCI to assume the role of the filter of brownfield pharma deals. These stakeholders prefer the route of Foreign Investment Promotion Board (FIPB) which they feel can be sensitised for the role of protecting public health in the country while clearing the brownfield pharma proposals in the country.

This is also in response to a commerce ministry request seeking prime ministers intervention in the matter. Admitting that there is a deadlock between various arms of the government on the method of regulating FDI in pharma, the commerce ministry in a recent letter to the PMO had sought a meeting of all stakeholder ministries to resolve differences with the Prime Minister as the chair. FE had reported that the PMO had sent a clear message to the commerce ministry stating that any further deliberations on a suitable process to clear brownfield pharma deals must comply to what has already been decided upon. In essence, it meant that whether the CCI is the suitable body to vet pharma deals should not form part of future inter-ministerial deliberations on the issue.

During the exchange of letters, the commerce ministry had asserted its preference of the FIPB over the CCI for the role of the guardian of public health in the country. Both the health and commerce ministries are clear that the CCI cannot be expected to stop a deal strictly and solely on grounds of public health.

Second, those supporting the FIPB route also argue that the CCI is a regulatory body with an adjudicatory body - the Competition Appellate Tribunal - above it, and thus its decisions are prone to being contested in the tribunal and higher courts, which could translate into inordinate delays in clearance of a deal. This would deter investments in the long term.

Similar differences divided a previous inter-ministerial group headed by planning commission member Arun Maira in 2011. The PMO stepped in last year to rule that Mairas suggestion of vetting brownfield deals through the CCI should become the norm, and gave the competition body six months to brace up for its new role. Meanwhile, the FIPB was asked to function as the temporary gatekeeper in case of pharma deals.

Although it has been over seven months now, the FIPB continues to act as the filter for pharma deals as the CCIs new role wouldnt be possible without amending the Competition Act.