The Foreign Investment Promotion Board (FIPB) on 5 July 2013 approved seven Foreign Direct Investments (FDI) proposals for investment in Indian pharmaceutical companies.
The approval has ended the policy of uncertainty over Investments in the sector. The board also has deferred three other Pharma proposals as there were ownership issues and it will be taken up after the Department of Industrial Policy and Promotion (DIPP) clarifies the policy.
The Department of Industrial Policy and Promotion (DIPP), the nodal body for framing FDI policy, will review the policy to make certain there are enough safeguards to ensure domestic healthcare concerns. The proposals which were discussed in the meeting include that of Singapore's GlaxoSmithKline Pte Ltd, US' Mylan Inc, Mauritius-based Castleton Investment Ltd, Mumbai-based Ferring Therapeutics and Hyderabadbased Verdant Life Sciences.
At present, 100% FDI in pharma sector is allowed through automatic approval route in the new projects but the foreign investment in the existing pharma companies requires FIPB approval.
What is Automatic Approval Route?
Most sectors are now open to 100% FDI, meaning thereby, that the foreign companies do not need a prior approval for investment either by the Government or the Reserve Bank of India.
The investors are only required to intimate the Regional office concerned of the Reserve Bank within 30 days of receipt of inward remittance. The automatic route allows Indian companies engaged in various industries to issue shares to foreign investors up to 100% of their paid up capital in Indian companies. The investors are also required to file necessary documents within 30 days of issue of shares.
About Foreign Investment Promotion Board
The Foreign Investment Promotion Board (FIPB) is a government body that offers a single window clearance for proposals on Foreign Direct Investment (FDI) in India that is not allowed access through the automatic route.
FIPB comprises of Secretaries drawn from different ministries with Secretary, Department of Economic Affairs, MoF in the chair. It is an inter-ministerial body which basically examines and discusses proposals for foreign investments in the country for sectors with caps, sources and instruments that require approval under the extant FDI Policy (prescribed vide Circular 1 of 2012) on a regular basis.
The Minister of Finance, considers the recommendations of the FIPB on proposals for foreign investment up to 1200 crore. Proposals involving foreign investment of more than 1200 crore require the approval of the Cabinet Committee on Economic Affairs (CCEA).