No change in pharma FDI policy
BS REPORTER
New Delhi, 29 November
The government has decided to continue with the current foreign direct
investment ( FDI) policy for the pharmaceutical sector, brushing aside
the long- drawn proposal of the commerce ministry.
The Anand Sharma- led ministry has been advocating a lower FDI cap in
brownfield, or existing ,drug making units, along with various
safeguards for acquisition of domestic critical care pharma companies
by multinational firms.
While there is no change in the FDI cap, the Cabinet decided to bring
in a breather for domestic players in the sector by doing away with
any noncompete clause in such agreements. This may mean that domestic
companies divesting stake in their drug manufacturing business can
continue to compete with separate ventures in the sector.
After the Cabinet meeting on Thursday, government representatives
indicated a decision on the pharmaceutical FDI policy was deferred,
following objections from the finance ministry and the Planning
Commission. But in a statement on Friday, the government said the
current pharma policy would continue.
"The Cabinet decided that the current policy in brownfield and
greenfield projects in the pharmaceutical sector will continue,
subject to the additional condition that in all cases of FDI in
brownfield pharma, there will not be any non- compete clause in any of
the inter- se agreements," the government said in a statement on
Friday.
Currently, the government allows 100 per cent FDI in both greenfield
projects and brownfield drug- manufacturing companies.
While investments in greenfield are allowed through the automatic
route, those in brownfield or existing facilities must be approved by
Foreign Investment Promotion Board.
The Department of Industrial Policy and Promotion (DIPP), under the
commerce ministry, had proposed a lower cap of 49 per cent for foreign
investment in rare or critical pharma verticals.
The contentious policy was stuck for long, primarily between four key
entities– the health ministry, the commerce ministry, the finance
ministry and the Planning Commission. While the ministries of health
and commerce were pushing for stringent rules and a lower cap on FDI
in brownfield or existing pharmaceutical companies, their proposal met
strong opposition from various other stakeholder ministries, including
finance ministry and the Planning Commission.
Earlier this year, various FDI proposals in pharma sector, seeking
approval from FIPB were delayed because of interministerial
differences. Later, with the intervention of Prime Minister Manmohan
Singh, the government, to bring down the its current account deficit,
decided to clear the pending proposal which included a whopping $ 1.8
billion investment proposal by US generic drug maker Mylan Inc to
acquire Strides Arcolab's injectible unit – Agila Specialities.
However, the government had then decided to create safeguards for
future foreign investment proposals in the pharma sector in the wake
of concerns that acquisition of existing critical drug- manufacturing
facilities could lead to a significant hike in prices of medicines,
while also creating a shortage of some drugs.
But, the latest decision of the Cabinet appears to have been backed by
the government's immediate financial needs.
Apart from seeking a lower cap of 49 per cent, DIPP had also sought to
bar foreign investors from divesting manufacturing, and research and
development (R& D) facilities in case of transfer of ownership of an
existing pharma firm and sought to impose a three- year lock- in on
investment. The proposal also sought to mandate foreign investors
direct 25 per cent of their total investments into research. The
proposed policy also defined ' rare and critical' as those drug
segments that had just five or limited Indian manufacturing units.
Besides, acompany with 40 per cent or more share in the domestic
market for any particular drug, would also be classified as rare and
critical.
Cabinet exempts some agriculatural exporters from stockholding limit
To facilitate larger export of food and agriculture items, the Union
Cabinet has exempted exporters who have IEC Code issued by the
Directorate General of Foreign Trade ( DGFT) from stockholding limits
imposed under the Essential Commodities Act, 1955. However, this
exemption will be only available for exporters of edible oilseeds,
edible oil and rice and will be limited only to the stocks meant for
export and not domestic sale. " This will help exporters benefit from
economies of scale and bigger operation for optimally meeting export
demands on along- term basis," an official statement issued on Friday
said. India's agriculture exports rose to a record ₹ 231,993 crore in
2012- 13, up 24 per cent from the previous year due to the lifting of
bans on various items. In 2012- 13, India has emerged as the world's
biggest rice exporter at 11 million tonnes.
Source Business line
RoC finds 15 violations of company law by NSEL
K.R. SRIVATS
THOMAS K. THOMAS
Asks Ministry to move Company Law Board
NEW DELHI, NOV. 29:
The Registrar of Companies has found total corporate governance
failure at the crisis-ridden National Spot Exchange Ltd.
"There was utter lack of transparency, integrity, competence,
compliance with law and ethics," an interim report of the RoC said.
The report, submitted after an inspection of NSEL, also highlighted 15
instances of company law violations besides the fact that Brand India
has been tarnished by several irregularities.
The Corporate Affairs Ministry may approach the Company Law Board
seeking supersession of the NSEL Board, the report recommended.
"The Ministry may seek appropriate relief from CLB to protect public
interest and safeguard the interest of those dealing with NSEL," it
said.
The Ministry will have to file a petition before the CLB seeking to
either displace the current Board or appoint external persons as was
done in the case of Satyam Computer, S. Balasubramanian, former
Chairman of Company Law Board, told Business Line.
If the Ministry knocks the CLB doors on the NSEL matter, then the
situation could be similar to the one at Satyam Computer when the
Government moved in to appoint (on behalf of the CLB) external persons
to run the company.
While the Ministry was lauded for moving in fast in the Satyam
Computer issue, things are different this time round.
The speed was certainly missing, probably because the entity involved
was not a listed one, say corporate observers.
IRREGULARITIES
The inspection has revealed several irregularities including failure
of the NSEL Board in performing its fiduciary duties towards
shareholders.
The board of directors has not bothered about the functioning of the
exchange (spot). Business of the company was not carried according to
prudent commercial practices/public interest, the report said.
srivats.kr@thehindu.co.in
--
CS A Rengarajan
9381011200
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