Foreign pharma firms wanting to invest up to 74 per cent in domestic companies will have to commit to maintain the same production level and supply of essential drugs at the time of investment for a period of five years, according to the latest relaxed norms of FDI.
Further, R&D expenses will also have to be maintained in value terms for five years at an absolute quantitative level at the induction of the FDI of up to 74 per cent, which has now been allowed under the automatic route.
In a press note, DIPP said: "The production level of National List of Essential Medicines (NLEM) drugs and/or consumables and their supply to the domestic market at the time of induction of FDI, being maintained over the next five years at an absolute quantitative level."
The benchmark for this level would be decided with reference to the level of production of NLEM drugs and or consumables in the three financial years immediately preceding the year of induction of FDI, it said.
Of these, the highest level of production in any of these three years would be taken as the level, it added.
Besides, R&D expenses need to be being maintained in value terms for five years at an absolute quantitative level at the induction of FDI.
"The benchmark for this level would be decided with reference to the highest level of R&D expenses which has been incurred in any of the three financial years immediately preceding the year of induction of FDI," DIPP said.
Moreover, the administrative ministry will be provided complete information pertaining to the transfer of technology, if any, along with induction of foreign investment into the investee company, it added.
DIPP said the above mentioned conditions will not be applicable to greenfield as well as brownfield projects of medical device industry.
The government has allowed up to 74 per cent foreign direct investment in the existing pharmaceutical companies through automatic route, with an aim to promote the sector.
Earlier, 100 per cent FDI was permitted through government approval route.
