The Economic Times, July 11, 2011

NEW DELHI: Planning Commission on Monday said there is no move “anywhere” to restrict foreign investment in pharmaceutical even as an expert group is looking into the specific issues related with FDI into the sector.

“I don’t think there is any move anywhere to prevent the expansion of existing 100 per cent foreign owned pharmaceutical companies or to prevent green field investment by foreign companies,” Planning Commission deputy chairman Montek Singh Ahluwalia said at the India-US High Technology Cooperation meeting.

Currently 100 per cent FDI is allowed in the sector. He was answering a question on whether the government was mulling restricting FDI in pharmaceutical sector. There are fears that acquisition of domestic pharma companies by MNCs will lead to drug price escalation.

Ahluwalia said due to this apprehension an expert group has been constituted under Planning Commission member Arun Maira to look into the issue.

“…(the expert group would see whether) there is any problem or should there be any restriction relating to merger and acquisition rules for existing Indian pharma companies,” he said.

Domestic pharma companies, spearheaded by the Indian Drug Manufacturers Association and Indian Pharmaceutical Alliance, had raised concerns that the takeover of Indian companies by foreign firms could lead to a situation of over-pricing of drugs and marginalisation of homegrown firms.

In 2008, Japan’s Daiichi Sankyo acquired a majority stake in Ranbaxy Laboratories , while Abbott Laboratories acquired Piramal Healthcare’s domestic formulations business last year.

The Department of Industrial Policy and Promotion (DIPP), a nodal agency responsible for FDI-related matters, had also raised concerns over the growing dominance of multinationals in the sector.

Meanwhile, speaking on poverty at an CUTS event earlier in the day, Ahluwalia said “nobody denies that the poverty is very high. It is governments view that the percentage of poor (people living Below Poverty Line) has not fallen as fast as we would like to”.

He also said that there is a need to broaden the debate beyond the numbers.

Suggesting ways to to deal with poverty, former Finance Secretary Ashok Chawla said:”We need more resources to deal with poverty. We need to increase our tax-GDP ratio which is currently hovering at around 10-11 per cent through broad-base taxation system”.

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