DIPP throws spanner in 100% pharma sector FDI plan

The department of industrial policy and promotions (DIPP) under the commerce and industry ministry too is finding the finance ministry's proposal to allow 100 per cent FDI in brownfield projects in the pharmaceutical sector hard to swallow.

This has forced the Foreign Investment Promotion Board (FIPB) to defer clearance of three proposals, including US-based Mylan Inc's $1.6 billion FDI proposal to acquire Agila Specialties.

The other two proposals for which clearances have been deferred on Friday include those of Singapore's GlaxoSmithKline Pte Ltd and Mauritius-based Castleton Investment Ltd.

This is the second time the FIPB is deferring clearance of the proposal over ownership issues.

While the finance ministry proposal aims to clear the hurdle by proposing FDI up to 100 per cent, DIPP, the nodal body for framing FDI policy, wants to ensure that such a policy does not harm domestic healthcare sector.

The DIPP's opposition to the 100 per cent FDI plan is that it would make generic life-saving drugs expensive, amidst a rash of acquisitions of domestic pharma firms by multinationals.

DIPP, on the other hand, has been proposing that it should be made mandatory for foreign investors in the pharma sector to invest average profit of last three years in R&D for the next five years.

The foreign entity should also continue investing average profit of the last three years in the listed essential drugs for the next five years and report the development to the government, DIPP suggested.

While a decision on the issue is yet to come, the government, in its enthusiasm to woo foreign capital, is reviewing the overall sectoral caps for FDI in all sectors.

A committee headed by economic affairs secretary Arvind Mayaram has suggested raising the 26 per cent cap and instead allowing up to 100 per cent FDI in certain sectors.