The Commerce Ministry has proposed far more stringent norms in existing drug companies by limiting all forms of foreign participation in them, including FII and FDI, at 49 per cent.
India received $2 billion of FDI in the sector between April 2012 and June 2013.
According to sources, the proposal is aimed at clarifying the level of overseas investment in the sensitive sector. It was earlier felt that foreign institutional investment (FII) could be over and above the FDI limit of 49 per cent.
“The proposal now says that the cap would be 49 per cent (FDI + FII) in existing firms. The Cabinet on Monday postponed the matter. It is expected to take it up soon,” sources added.
Currently, India permits 100 per cent FDI in new pharma companies through the automatic approval route. The same level is allowed for overseas investment in existing pharmaceutical companies, with approval from the Foreign Investment Promotion Board (FIPB).
The Department of Industrial Policy and Promotion (DIPP), a wing of the commerce ministry, had proposed reducing the FDI cap in “rare or critical pharma verticals” to 49 per cent from 100 per cent.
Unabated takeovers of Indian pharma companies and facilities by multi-national corporations between 2006 and 2011 necessitated a review of the FDI policy in the brownfield pharma sector. From November 2011 to July 2013, as many as 74 pharma sector proposals were approved by the FIPB.
“The takeovers have severely affected the entire sector, including manufacturing, marketing of oral formulations, injectables, specialised oncology verticals, vaccines, consumables and devices,” sources said.