Montek Bats For 100% FDI In Pharma.

Planning Commission deputy chairman Montek Singh Ahluwalia on Monday endorsed allowing 100% foreign direct investment (FDI) in the pharmaceutical sector. "I endorse the view that there should be no case for rollback from 100% FDI," Ahluwalia said in response to a question posed to him at a conference.

Large multinational pharma companies that have of late been acquiring Indian companies, known for their generics business, have opposed any move to reduce the ceiling amid pressure from local industry lobbies. Industry groups backed by domestic players have been seeking restrictions on mergers and acquisitions arguing that India would turn into a contract manufacturing centre and would lose its edge. Another concern is that prices of medicines will increase due to lack of generics and rise of imported patented drugs.

An inter-ministerial panel comprising senior officials from the health ministry, department of industrial policy and promotion, the pharmaceuticals department and the finance ministry was tasked with the mandate of suggesting measures that could help retain India's competitiveness. As reported by TOI on July 5, the panel had recommended that the FDI cap for brownfield pharma projects, which would include expansion and M&As, be cut to 49%, while the ceiling for greenfield ventures be retained at 100%.

"I don't think there is any move anywhere to prevent expansion of existing 100% foreign-owned pharmaceutical companies or greenfield investment by foreign companies," Ahluwalia said during a meeting of the India-US High Technology Cooperation Group.

Following the inter-ministerial panel's recommendations, the government had set up a group under Planning Commission member Arun Maira to look at the ideal policy regime for the sector. Ahluwalia had earlier told TOI that the move was the result of discussions in the Union cabinet though officials from other ministries have questioned the wisdom of roping in the plan panel to adjudicate on the issue since it is neither involved with FDI policy not is it concerned with clearances.

"The expert group appointed under Arun Maira will see whether there is any problem relating to merger and acquisition rules of pharmaceutical companies in the country," Ahluwalia said at the meeting on Monday.

While the foreign companies have supported the move saying that a reduction in the ceiling would mark the first instance of a sectoral cap being reduced in India. "FDI should not stand for funds deserting India," Novartis president Ranjit Shahani, who is president of the OPPI, a lobby group representing multinational drug companies had told TOI last week. OPPI has argued that the government has tools available with it to address concerns raised by the domestic players and civil society groups.

In 2001, when the government issued a press note allowing 100% FDI under the automatic route, it had put in place two conditions related to transfer of technology and investment in manufacturing, said Indian Pharmaceutical Alliance secretary general D G Shah. "Both conditions have not been met. On the contrary, what we are seeing is several companies are shutting down manufacturing facilities in India, are winding up R&D and are importing patented medicines while not producing drugs or vaccines for the local market. If this continues, we will only be involved in contract manufacturing," he had said.

Source : timesofindia.indiatimes.com