Sources said 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 yesterday (Monday) postponed the matter. It is expected to take it up soon,” they added.
Currently, India permits 100 per cent foreign direct investment (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.
Over 95 per cent of FDI in the pharma sector between April 2012 and June 2013 was in brownfield or existing projects. India received $2 billion of FDI in the sector during this period.
Sections of the government such as the DIPP and the Ministry of Health and Family Welfare have raised concerns about the merger and acquisition of Indian pharma firms, saying it may affect availability of affordable generic drugs.