Govt plans to relax FDI norms in pharma firms

The Dollar Business Bureau 

In order to attract more foreign investment, the government is planning a proposal to ease FDI (foreign direct investment) in existing pharmaceutical firms.

According to a Finance Ministry’s proposal, FDI up to 49 percent should be permitted via the automatic route, through approval of the Foreign Investment Promotion Board (FIPB). The proposal is in the discussion stage with the Finance Ministry and Department of Industrial Policy and Promotion (DIPP).

At present, FDI up to 100 percent is allowed in the pharmaceutical sector in new projects. However, in brownfield projects, the foreign investment is permitted through FIPB approval.

DIPP has already ordered a study to analyse the impact of FDI in existing pharmaceutical firms, amidst apprehensions over mergers and acquisitions of Indian drug companies.

FDI in the pharma sector is a debatable issue as questions have been raised over a few mergers and acquisitions of domestic pharmaceutical companies by foreign majors.

The Parliamentary Standing Committee on Commerce, in a report, had suggested that a study group be created to assess the impact of FDI on operational or brownfield pharma companies. The parliamentary committee had also proposed that the government should put a blanket ban on any foreign investment in brownfield pharmaceutical projects.

India is considered as the world’s key generic medicine hub. The country's market size of the pharmaceutical industry is projected to be more than $20 billion. 

According to estimates, more than 96 percent of the overall FDI in the sector between the April 2012 and April 2013 period was into brownfield pharma firms.