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RBI notifies new FDI norms for pharma sector

Last Updated: Friday, December 9, 2011 - 21:55

Mumbai: The Reserve Bank on Friday notified new rules doing away with automatic approval for foreign direct investment (FDI) in existing pharmaceutical companies.
Tightening the norms, the government had last month done away with automatic approval of FDI in the existing pharmaceutical companies.
"FDI, up to 100 per cent, would be permitted for brownfield investment (i.e. investments in existing companies), in the pharmaceutical sector, under the Government approval route," RBI said in a notification.
Under the new rules, for any merger or acquisition, the overseas investor will have to seek permission from the Foreign Investment Promotion Board (FIPB).
After six months, it will be the monopoly watchdog Competition Commission of India (CCI) which will vet such deals.
The decision follows directions from Prime Minister Manmohan Singh, who along with his senior Cabinet colleagues had deliberated on October 10 over concerns arising out of several acquisitions of domestic pharmaceutical companies by overseas firms.
For the new investment, 100 per cent FDI will be allowed under the automatic route, under which investors only inform the Reserve Bank about the inflows and no specific government nod is required.
"FDI, up to 100 per cent, under the automatic route, would continue to be permitted for green field investments in the pharmaceuticals sector," RBI said.
The filter was suggested by a high-level committee, headed by Planning Commission Member Arun Maira.
Concerns have been raised over the impact of a spate of acquisitions of homegrown firms by multi-national companies.
The recent acquisitions include Ranbaxy Laboratories buy out by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France and Piramal Health Care by Abbott Laboratories of the US.
The affordability factor has so far been the hallmark of the Indian generic drugs all over the world, thanks to robust growth of the homegrown players.


First Published: Friday, December 9, 2011 - 21:55
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