NEW DELHI: The government has formed an inter-ministerial panel for finalising guidelines for allowing MNCs to buy equity stakes in Indian drug companies, as it seeks to end the regulatory uncertainty that is holding up clearances of such proposals.
An eight-member ‘Special Group’, headed by an additional secretary in the finance ministry, will lay down the guidelines by the month-end that will deal with the basic concerns expressed by various stakeholders.
FIPB, the body that clears foreign investment proposals in the country, will clear brownfield FDI applications in the pharma sector on the basis of these parameters.
Stake acquisition proposals of foreign drug companies have not been approved for the past few months because of the confusion that has been caused by the government deciding to approve these applications on a case-by-case basis without framing appropriate guidelines.
Following a spate of acquisitions of Indian drug companies by MNCs in the last 2-3 years, concerned were raised by some local companies and health activists that if foreign players come to dominate the Rs 62,000-crore local market, medicine prices will rise and so will dependence on imported drugs.
In October, an inter-ministerial group headed by the prime minister decided to make competition regulator Competition Commission of India (CCI) the approving body for all brownfield foreign investments in the sector, ending a decade-long policy of automatic FDI approval.
FIPB was to clear investment proposals for an interim six-month period, which ended in April. But due to the absence of clear-cut norms, it has dithered over such proposals, even as it has recently given the go-ahead to overseas financial investors who wish to buy shares in domestic drug makers.
“… due to various reasons, the process of considering the proposals by FIPB is taking a longer time than what was expected,” said a finance ministry office memorandum notifying the constitution of the ‘Special Group’, last week.
The inter-ministerial group of officials, which includes representatives from the health ministry, commerce ministry, foreign ministry, overseas Indian affairs ministry department of pharmaceuticals , and department of industrial policy and promotion (DIPP) is expected to stipulate that MNCs commit to continue manufacturing and making available essential drugs in the country that were made by Indian companies before they were taken over.
The department of pharmaceuticals has urged the FIPB to expedite the process of clearances. “We want regular inflow of FDI in the pharma sector and FIPB needs to consider them on merit. They should not continuously defer applications on some issue or the other,” said the department’s joint secretary Raja Sekhar Vundru.
The ‘Special Group’ will consult the pharmaceutical industry and experts before finalising the guidelines. According to a news agency report on Monday, the finance minister has called a meeting of industry stakeholder on Thursday to sort out issues delaying clearances to FDI proposals. “We will give them a check-list of the essential information FIPB needs,” the report said, quoting a finance ministry official.
The power of clearing M&A proposals involving foreign investment was to be transferred to the competition regulator by April, but this has not happened so far.