Consensus within the Government still eludes on the clauses of the proposed policy on foreign direct investment in the pharmaceutical sector, which is expected to be taken up by the Cabinet for approval at its next meeting.

The proposal, prepared by the Department of Industrial Policy and Promotion (DIPP), has stringent norms including limiting of all foreign participation through FDI and foreign institutional investors to 49 per cent. The proposal, scheduled for discussion on Monday by the Cabinet, has been deferred.

According to sources, the proposal by the DIPP was already sent to all concerned departments. The Finance, Commerce and Health Ministries have backed the suggestions to change the current policy and limiting the FDI.

However, the Prime Minister’s Office is not in favour of the change and wants to continue with the existing pattern, while the Department of Pharmaceuticals (DoP) is yet to spell out its suggestions. However, DoP also in principle is in favour of limiting the investment, thus showing divergent views within the Government over the policy, it is learnt.

Currently, India permits 100 per cent 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).

“If the policy continues to be implemented in the existing manner, the access to medicine scenario in the country could adversely impact production, availability and prices. India could then be dependent for life-saving medicines either on domestic facilities of MNCs or imports. India is already import-dependent for intermediates and critical drugs like penicillin. About 70 per cent of India’s API/intermediates are imported from China,” an internal document prepared for the Cabinet by the DIPP states.

Recently, the Parliamentary Standing Committee of Commerce had also mounted pressure on the government, calling for a blanket ban on FDI in existing pharmaceutical projects and putting an end to the take-over of domestic companies by foreign players.

The Health Ministry had even suggested more stringent norms like limiting the FDI cap at 26 per cent, though it was turned down by the DIPP which was asked to prepare the proposal for cabinet approval. However, the Health Ministry is expected to get greater role as per the new proposal.

It has also proposed that foreign investors be mandated to create at least 25 per cent additional capacity and generate additional employment in the critical pharma projects they are investing in.