FDI limit raised in pharma sector

By Our Special Correspondent

NEW DELHI, JAN. 6. The Government today approved changes in the drug policy to permit foreign direct investment up to 74 per cent in bulk drugs, their intermediates and formulations. It also enhanced crude royalty and partially modified the State surcharge scheme of the Petroleum Ministry to pave the way for smooth movement of controlled petroleum products from the six stand alone refineries.

These decisions were taken here today by the Cabinet Committee on Economic Affairs (CCEA) which also cleared the award of 12 out of 25 oil exploration blocks to Reliance Petroleum under the New Exploration and Licensing Policy (NELP).

This was disclosed here today by an official spokesperson who said the decision in the drug sector would promote greater foreign participation in the drugs and pharmaceuticals industry.

Investment above 74 per cent will now be considered on a case-by- case basis in areas where investment is otherwise not forthcoming. This is especially in the manufacture of bulk drugs from the basic stages and their intermediates and bulk drugs produced by the use of recombinant DNA technology as well as the specific cell/tissue targeted formulations.

The spokesperson said the move to raise foreign investment limit in the area of bulk drug development would attract foreign players to invest more in this sector. Till now investment above 51 per cent had been considered on a case-by-case basis in bulk drugs, intermediates and formulations. This decision was in line with the commitment made by the Finance Minister, Mr. Yashwant Sinha, in the last Budget to raise the FDI limit for the pharmaceutical sector from 51 to 74 per cent.

She said the CCEA also approved the award of 25 blocks under the NELP. The production sharing contracts will be finalised after legal vetting from the Law Ministry and approval by the Petroleum Ministry.

Reliance Petroleum has bagged as many as 12 blocks, including two deep water off-shore blocks in the Krishna-Godavari basin. The ONGC has been awarded five blocks while the ONGC-Indian Oil Corporation combine has bagged two blocks and the ONGC-Gas Authority of India consortium has been awarded another two blocks. The balance blocks have been awarded to Oil India, GAIL- Gazprom, Cairn Energy India, Mosbacher Energy-Energy Equity- Hindustan Oil Company (HOEC) and a consortium led by Geoempro India.

The CCEA also approved award of two on-land blocks in Gujarat to a consortium of Gujarat State Petroluem Company and HOEC. In addition, negotiations have commenced for finalising production sharing contracts for ten discovered fields in Gujarat out of 6 which have been awarded to a consortium involving GSPC.

Crude royalty hiked

The spokesperson said the CCEA had enhanced the royalty rate on crude from Rs. 578 to Rs. 750 a tonne with effect from April 1, 1996. This would mainly benefit Gujarat as it a major producing State.

Regarding, the modification of the State surcharge scheme, she said one-third of the under recoveries of oil companies owing to taxes on inter-State sale of controlled petroleum products would now be met from the Oil Pool Account. Consequently, the amount of State specific surcharges in the price build up of controlled products would get reduced in the States in which such refineries were located. In all, there are six stand alone refineries in the country which will benefit from this decision. These are BRPL and NRL Assam, RPL in Gujarat, MRPL in Karnataka, CRL in Kerala and MRL in Tamil Nadu.

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