Decision to change FDI policy in pharma sector has been quite a bone of contention between health, commerce & industry and finance ministries

The Cabinet Committee on Economic Affairs (CCEA) is likely to consider the proposal on changing foreign direct investment (FDI) policy in pharmaceutical and real estate sectors in its meeting on November 7.

The decision to change FDI policy in pharmaceutical sector has been quite a bone of contention between the ministries of health, commerce and industry and finance.

“The final decision rests with the Cabinet and it might be considered this week,” a senior official in the department of industrial policy and promotion (DIPP) told Business Standard.

While both health ministry and ministry of commerce and industry have batted for putting more restrictions for new players entering the sector here, the finance ministry is of the view that the sector should not be made subjected to various riders in order for the country to earn the required foreign exchange.

In the draft cabinet note that was floated by DIPP last month, the health ministry has supported the former’s views on imposing more conditions. Commerce and industry minister Anand Sharma had maintained that new policy will make sure that effective safeguards are put in place and monitored, keeping in mind the concerns over a series of takeovers of domestic pharmaceutical companies by international players.

However, the finance ministry is not in favour of putting any restrictions at all and wants the present policy to continue. This the ministry has stated in the cabinet note. In August Prime Minister Manmohan Singh had chaired a high-level meeting on the issue and urged the matter to be expedited.

Presently, 100% FDI is allowed in new projects through the automatic route in the pharmaceuticals sector while 100% is also allowed in existing facilities subjected to government’s permission.

The CCEA is also expected to give its approval for easing FDI rules in the real estate sector. According to the draft Cabinet note floated by DIPP, foreign developers will be allowed to take back the entire invested amount before three years, after obtaining the government’s approval.

Source: Business Standard

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