A high level ministerial group chaired by the Prime Minister has set the clock back on foreign direct investment (FDI) in the drugs and pharmaceutical sector. The group included the ministers of finance, health, commerce and industry, and pharmaceuticals and chemicals, as well as the deputy chair of the country's Planning Commission.
The group has reversed India's rules allowing FDI in pharmaceuticals companies and decided that going forward, the country will split its FDI rules for the pharmaceuticals sector into two groups—those that apply to new (greenfield) projects and those that apply to existing (brownfield) projects.
The group has decided that India will continue to allow 100% FDI, without prior government approval, in greenfield projects in the pharma sector. However, FDI in existing (brownfield) ventures in the pharma sector will now be permitted only with the prior approval of the country's Foreign Investment Promotion Board (FIPB).
The FIPB approval requirement is expected to apply for the next six months. During this period, necessary enabling regulations will be put in place by the Competition Commission of India (CCI) to ensure effective oversight of mergers and acquisitions that strikes a balance between public health concerns and attracting FDI in the pharma sector. Once these enabling regulations are in place, the requisite oversight will be done by the CCI entirely in accordance with the competition laws of the country.
The government's press release does not say anything about previous FDI in brownfield projects and one therefore assumes that previous FDI transactions are unaffected by these new rules.