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Foreign Direct Investment (FDI) in the pharmaceutical sector would not be under the automatic route anymore, but will need prior Foreign Investment Promotion Board (FIPB) approval, reports CNBC-TV18’s Rituparno Bhuyan.
This was the outcome from todays inter-ministerial meeting chaired by Prime Minister Manmohan Singh and attended by commerce minister Anand Sharma and health minister Ghulam Nabi Azad.
It was decided that foreign investments into brownfield pharma projects will have to approach the FIPB. However, no cap will be introduced on FDI which will remain at 100%.
This is quite significant, considering right now FDI in the pharma sector is permitted under the automatic route.
The Maira Committee’s recommendations to strengthen the CCI were accepted.
To ensure balance, the CCI or the Competition Commission of India will oversee brownfield pharma mergers and acquisitions (M&A) activities.
Between April 2000 and June 2011 about USD 9 billion worth of FDI came into this sector, out of which 50% was for M&As. The health ministry had raised a red flag on the issue saying that these M&As will affect the government’s ability to make available low-priced generic medicines for the aam aadmi which was the context of today’s meeting.
Pharma FDI will now be routed through the FIPB for up to six months. The FIPB will have an oversight over all pharma related FDI coming into the country. However, the cap of 100% that remains that has not been touched.
All these changes will be implemented in the next six months. Until then the current FDI regime continues.
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