Govt not to reduce FDI cap in existing pharma companies

The government on Friday said it will not reduce the foreign direct investment cap in the existing pharmaceutical companies.

Currently, 100 per cent FDI is permitted in brownfield pharma firms through clearance from the Foreign Investment Promotion Board.

"We are not reducing (the FDI cap in brownfield pharmaceuticals) for the moment," Commerce Minister Anand Sharma told reporters in New Delhi.

He said, however, that the non-compete clause which prevents the acquired entity from producing similar products by the acquirer would be done away with.

The decision was taken by Union Cabinet on Thursday.

The Department of Industrial Policy and Promotion has proposed to reduce foreign direct investment cap to 49

per cent in the rare and critical pharma units.

This demand was strongly opposed by the Finance Ministry.

According to sources, many of the other proposed conditions, which aimed at tightening of the FDI policy, were rejected in the yesterday's meeting.

The DIPP has proposed incorporating conditions for foreign firms like mandatory investment in R&D.

The department has proposed these conditions against the backdrop of unabated takeovers of Indian pharma companies and facilities by multi-national corporations.

From November 2011 to July 2013, as many as 74 pharma sector proposals were approved by the FIPB.

Over 95 per cent of FDI in the pharma sector between April 2012 and June 2013 was in brownfield or existing projects. India received $2 billion of FDI in the sector during this period.