Inter-ministerial group suggests cut in pharma FDI cap to 49%

In a bid to prevent acquisition of domestic pharmaceutical firms by multinational giants, an inter-ministerial group (IMG) has suggested that Foreign Direct Investment (FDI) cap in the sector should be lowered to 49 per cent

The move, which has not gone well with the foreign players, has now been referred to the Planning Commission, according to a report in The Times of India. At present, the government permits 100 per cent foreign investment in Indian firms.

The newspaper, quoting sources, said a panel comprising representatives of health ministry and industry departments had recommended that in case of brownfield ventures, not only should FDI be capped but these investments should also be approved by the government.

At present, foreign firms only need to inform the Reserve Bank of India, the country's central bank, on investments in an Indian company.

The panel, set up following protests from the domestic industry, has said the present system of 100 per cent FDI through the automatic route be retained for greenfield ventures.

This is the first instance of the government reducing the sectoral FDI ceiling to protect domestic firms.

The decision follows concerns in the recent years that several well-known Indian pharmaceutical companies have been acquired by global giants.

The list includes Japan's Daiichi's acquisition of Ranbaxy, stake sale by the Piramals to Abbot Laboratories, acquisition of Shanta Biotech by Sanofi Aventis, Orchid Chemicals by US-based Hospira and Matrix Labs by Mylan Inc.