Keen on removing the hurdles in the way of foreign investments and infusing fresh capital in the country's economy, Prime Minister Manmohan Singh will hold a key meeting on Thursday evening to review FDI policy in the pharmaceutical sector.
The meeting may take a call on putting FDI clearances in existing domestic pharmaceuticals (Brownfield) units on the automatic route, speeding up the investment process considerably.
Currently, overseas investors need to obtain clearances from the Foreign Investment Promotion Board (FIPB) to acquire Brownfield projects. Only investments in new (Greenfield) projects enjoy approval through the automatic route, which only requires clearances from the Reserve Bank of India and SEBI.
The meeting will be attended by finance minister P Chidambaram and commerce & industry minister Anand Sharma, among others.
The Indian pharma sector-estimated at almost R1 lakh crore- allows 100% FDI for both Brownfield and Greenfield projects. "But there is a need to loosen the red tape and expedite the process of investment inflow. A decision can be expected at Thursday's meeting," said a top government official.
The meeting on FDI in pharma sector comes close on the heels of the government's bold decision to open up the multi-brand retail sector as well as civil aviation to foreign investors. In September, the Union cabinet allowed up to 49% foreign capital in domestic airlines and 51% FDI in multi-brand retail. The second decision has come under fierce criticism from a larger section of the opposition, and even allies.
In October 2011, the UPA government had put FDI in Brownfield pharma industries-which earlier enjoyed automatic clearance-on the FIPB approval route.
According to sources, the finance ministry wants FIPB route only in cases of FDI beyond 49% in Brownfield projects. Commerce ministry, however, wants a blanket FIPB approval for any investment in existing pharma units.
Under the new rules, the foreign investor has to seek the permission of the FIPB, and get the proposal vetted by monopoly watchdog Competition Commission of India (CCI). The PM's meeting is also likely to redefine the role of CCI for such transactions.