Cabinet defers decision on relaxing FDI norms in pharma

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SME Times News Bureau | 29 Nov, 2013
The Cabinet Thursday deferred decision on relaxing FDI norms for the housing sector and reducing foreign investment limit to 49 percent in rare and critical areas of the pharma segment, reports media.

The decision on FDI in pharma and housing has been deferred, Information and Broadcasting Minister Manish Tewari said after the Cabinet meeting in New Delhi.

The Department of Industrial Policy and Promotion (DIPP) has proposed to reduce FDI cap from 100 per cent to 49 per cent in the "rare or critical pharma verticals".

Several departments, including the DIPP, have raised serious concerns over continuous acquisitions of Indian drug makers by global multinational firms.

According to sources, three categories have been proposed to define "rare or critical". It includes companies with five or more manufacturing units, and companies with 40 per cent or more market share irrespective of the total number of manufacturing facilities.

"If an entity manufactures multiple products, it will be treated as critical if either of the above two conditions are satisfied for at least one third of the products," said a source.

The DIPP has also proposed incorporating conditions for foreign firms like mandatory investment in R&D and non-compete clause in the shareholders pact.

India at present permits 100 per cent FDI in the pharma sector through automatic approval route in the new projects, but the foreign investment in existing pharma companies is allowed only through FIPB's approval.

Regarding FDI in the housing sector, DIPP has proposed relaxing FDI norms including easing conditions for exit before the three-year lock-in period. It has proposed easing conditions for exit of foreign players before the three-year lock-in period.