FDI in pharma: PMO sends missive to finance, industry ministries seeking progress report

The Prime Minister’s Office has shot off letters to finance and industry ministries seeking a progress report on implementation of the changes in the foreign direct investment policy in the pharmaceutical sector, sensing a prolonged inter-ministerial wrangling over crucial components of the new policy.


“The policy was finalised nine months ago…PMO wants to know the status of implementation,” said a government official privy to the matter, indicating unhappiness with the tardy pace of progress.

The missive comes amidst reports that various government departments have locked horns over various components of the FDI policy for the pharmaceuticals sector.

The department of industrial policy and promotion (DIPP) and the department of economic affairs in the finance ministry are fighting over who should clear foreign investment proposals in Indian pharmaceuticals companies. Separately, departments of pharma, health, industrial policy and promotion and economic affairs are sparring over imposition of specific conditions on foreign investors.

“The merits of the case are not being examined and it has become an ego issue. When people take positions, the real objective gets lost,” says D G Shah, secretary general of Indian Pharmaceutical Alliance, a representative body of big Indian pharma companies. Shah says policy standstill suits Indian companies that want to sell out to global pharma majors.

With the PMO taking active interest in the sector, it is expected that the seemingly complicated policy issues may be resolved expeditiously.

A ministerial group headed by Prime Minister Manmohan Singh had in October 2011 put foreign investment in brownfield pharma on approval route, changing the 10-year old policy of automatic clearance to address the health ministry’s concerns after a spate of acquisitions.

The health ministry was worried that large scale takeover of Indian pharma companies by multinationals would deny Indians cheap drugs. The Foreign Investment Promotion Board’s or FIPB’s prior clearance, thus, became mandatory for any foreign direct investment in an existing pharma company, as per the new framework.

After six months, foreign investment deals in existing pharma companies were required to get a nod fromCompetition Commission of India and concerned ministries had to put in place necessary regulatory framework.

But, the DIPP is insisting on continuing with the stop-gap arrangement of FIPB functioning as the approving authority. The DEA, headed by Singh himself now, wants to go by what was decided by the prime minister nine months back.

R Gopalan, secretary in the department of economic affairs and his counterpart in the DIPP Saurabh Chandra have also exchanged letters arguing in favour of their respective views.

(curtsey: economic times)

Rupesh Yatesh Dalal
Head Research Department

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