Government is considering a proposal to relax foreign direct investment (FDI) norms in existing pharmaceutical companies with a view to attracting more overseas inflows. According to a proposal of the Finance Ministry, FDI up to 49 per cent should be allowed through the automatic route and anything beyond through approval of the Foreign Investment Promotion Board (FIPB), sources said.
The DIPP and the Finance Ministry are discussing the proposal. Currently, FDI up to 100 per cent is permitted in new projects in the pharmaceutical sector, but in brownfield ones -the existing companies -- the foreign investment is permitted through FIPB approval. DIPP has already commissioned a study to assess the impact of foreign direct investment in existing pharmaceutical companies amid concerns over mergers and acquisitions of domestic drug manufacturers.
FDI in the sector is a contentious issue as concerns have been raised over some mergers and acquisitions of Indian pharma companies by foreign giants. Analysts feel that it is impacting accessibility and growth of the generic industry in the country.
In fact, a report of the Parliamentary Standing Committee on Commerce had suggested that a study group be set up to examine the effect of FDI on brownfield pharma or operational firms. The panel had even suggested that the Government should impose a blanket ban on any FDI in brownfield pharma projects.