CCEA call on pharma & realty FDI norms likely on Thursday

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 a proposal seeking changes in the foreign direct investment (FDI) policy for pharmaceutical and real estate sectors in its meeting on Thursday.

The move to change the FDI policy for the pharmaceutical sector has been 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 & promotion (DIPP) told Business Standard.

While both the health ministry and the commerce ministry have batted for putting more restrictions for new players entering the pharma sector here, the finance ministry does not want any riders that would hit foreign exchange earnings.

In the draft cabinet note floated by the DIPP last month, the health ministry supported the former’s views on imposing more conditions.

Commerce and industry minister Anand Sharma has maintained that the new policy will make sure 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 said in the draft note that it wanted the present policy to continue.

Prime Minister Manmohan Singh had chaired a meeting on the issue in August and urged the matter to be expedited.

At present, 100 per cent FDI is allowed in new projects through the automatic route in the pharmaceuticals sector, while 100 per cent is also allowed in existing facilities, subject 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, foreign developers will be allowed to take back the entire invested amount before three years, after obtaining the government’s approval.

According to the current FDI policy, the lock-in period of three years applies to every tranche of investment brought in by a foreign player from the date of receipt or from the date of 'completion' of minimum capitalisation, whichever is later.

Developers had long been complaining such restrictions as the lock-in norms deter them from investing in the Indian market.