Cabinet refuses to peg pharma sector FDI at 49%

An investment-focused government on Thursday decided to delay a decision on foreign investment limit in India's sensitive pharmaceutical sector rather than straightaway reject a proposal by the Department of Industrial Policy and Promotion (DIPP) to ban foreign takeovers of 100 per cent control of critical lifesaving drugs production facilities.

Government officials concerned with investment policies also, on Thursday,  countered the DIPP's proposal to lower the cap on foreign direct investment (FDI) in the pharmaceutical sector from 100 per cent to 49 per cent, saying that policies cannot be changed every other day.

The DIPP, which is under the commerce ministry, had proposed allowing 100 per cent FDI in only new or greenfield pharma units through the automatic route and limiting FDI in brownfield projects or takeovers to select drugs, under FIPB scrutiny.

It has strongly recommended to the cabinet that foreign investments in projects manufacturing critical or rare drugs should be limited to 49 per cent (FDI and FII together).

''The Cabinet decided that government policies cannot be revisited every three months and so the DIPP's proposal on changing the policy on FDI in pharma be rejected.''

DIPP's proposal to change FDI norms in pharmaceutical sector comes in the wake of an alarming number of shutdowns of Indian manufacturing facilities and R&D centres for cancer and injectables and Active Pharmaceutical Ingredients (API) by their foreign acquirers.

DIPP has also suggested that FDI in pharma sector should be subject to approval of the Foreign Investment Promotion Board (FIPB).

The mass closures of R&D facilities and manufacturing facilities would create acute shortages of essential medicines in the country, pushing it back to the era when the country was heavily dependent on MNCs for medicines, DIPP had pointed out.

This, the DIPP feels, can render the country vulnerable in the critical area of healthcare.

At the end of the cabinet meeting, minister of state for information and broadcasting (independent charge) Manish Tewari merely told the media that a decision on tightening FDI norms in pharmaceutical sector has been deferred.