New Delhi: The Industry Ministry has given its dissent note to the report of the high-level committee, which suggested that all FDI proposals for takeover of existing Indian pharmaceutical companies should be approved by competition watchdog CCI.The report of the committee headed by Planning Commission member Arun Maira on FDI in existing pharmaceutical firms, is likely to be reviewed by Prime Minister Manmohan Singh on October 10.
The Industry Ministry's "dissent note would be part of the report", a Department of Industrial Policy and Promotion (DIPP) official said. DIPP is the nodal arm of Industry Ministry which deals with FDI related issues.
The note argued that instead of Competition Commission of India (CCI), Foreign Investment Promotion Board (FIPB) is the right gateway for clearing mergers and acquisitions in the pharma companies.
FIPB is an inter-ministerial body of senior officials under the Finance Ministry which approves FDI proposals.
In the wake of a spate of mergers and acquisitions (M&As) of domestic pharma firms, a concern has been raised in the government quarters that prices of generic drugs would shoot up.
The affordability of medicines has so far been the hallmark of the Indian generic drugs all over the world, thanks to robust growth of the homegrown players, several of which have been targeted by multi-national firms for M&As.
The recent buyouts of the Indian firms by multi-national firms included takeovers of market leader Ranbaxy Laboratories by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France, Piramal Health Care by Abbott Laboratories of US.
Also, Matrix Lab and Orchid Chemicals were bought over by Mylan Inc and Hospira of the US, respectively. Dabur Pharma was acquired by Fresenius Kabi of Singapore.
The dissent note said that as the role and powers of CCI have been notified recently, the capacities of CCI would need to be strengthened if it has to act as a gate-keeping mechanism for acquisition in the drugs and pharmaceutical sector.
"The urgency of the issues at hand do not permit us the luxury of waiting for such capacities to be built-up," it said.
It also said that while CCI is a statutory body mandated to scrutinise anti-competitive practices, FIPB is a policy mechanism and the concern being addressed is one of FDI policy. "The parameters within which the CCI can work would necessarily be circumscribed by the provisions of the Competition Act, which is structured around the determination of anti-competitive practices. The CCI may, therefore, not be able to take on board public interest concerns related to public health," the note said.
Further it said that the DIPP is in agreement with the recommendations of the High Level Expert Group on Universal Health Coverage set up by the Planning Commission that "we need to urgently revisit India's FDI regulations to amend the present rules on an automatic route of 100 percent share of foreign players in the Indian pharma industry".
DIPP said that while the government can permit 100 percent FDI in green field projects without any restrictions on the automatic route, a scrutiny for FDI in existing firms through the FIPB is required.
Under the automatic route, a foreign company can invest in India without seeking prior approval from the FIPB. But the Reserve Bank needs to be informed about the inflows.
During April-July this fiscal, India received FDI worth USD 2.99 billion (Rs 13,426 crore) in drugs and pharmaceutical sector.
Indian pharmaceutical industry is expected to become a USD 20 billion industry by 2015, from its present turnover of USD 12 billion.
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