Government to tweak FDI policy for pharma to protect domestic units

A high-level meeting chaired by Prime Minister Manmohan Singh has asked the Commerce and Industry Ministry to start inter-Ministerial consultations on the issue of changing the norms of FDI policy for pharma which, in its current form, is not serving its objectives and that it needs to be fine-tuned to ensure that cheap drugs are made available to the people at large.

Why there is a need being felt to bring changes in FDI policy for pharma sector?

As it is believed, the policy in its existing for is not serving the purpose it was designed for. For instance, if 100% FDI limit in the pharma sector is upheld, there are apprehensions, it will impact the domestic generic drug industry and it could lead to India’s dependence on imports for life-saving drugs. Further, there are concerns that MNCs have acquired brownfield projects of domestic companies but have spent very little on R&D in India. Over 96% of FDI between April 2012 and April 2013 has come into Brownfield projects. It has not led to significant addition to gross assets or jobs or increase in R&D expenditure. A parliamentary panel has recommended to impose a blanket ban on FDI in brownfield projects.

Besides, there are concerns over the ability of Indian firms to take advantage of the situation of blockbuster drugs going off patent through 2015 could be impaired. As many as 67% of drugs worth $80 billion is expected to go off the patent regime between 2011 and 2013.

Currently, around 28% of the market is controlled by MNCs. If another top three Indian companies are acquired by MNCs, their share would increase to 41% and on acquisition of the next rung of eight companies, their share will go over 55%.

What is a “Brownfield Project” ?

In a Brownfield project the structure would need to be demolished or renovated. Those facilities which are modified/upgraded are called Brownfield land projects (often the pre-existing site/facilities are contaminated/polluted.)

What is a “Greenfield Project” ?

A Greenfield is a project that lacks any constraints imposed by prior work. The analogy is to that of construction on greenfield land where there is no need to remodel or demolish an existing structure. Examples of greenfield projects are new factories, power plants, airports which are built from scratch on greenfield land.

Both the Greenfield Project and Brownfield Project relate to property construction.

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