According to sources, the decision was taken at a high level meeting chaired by Prime Minister Manmohan Singh that was attended by Finance Minister P Chidambaram, Commerce and Industry Minister Anand Sharma and Health Minister Ghulam Nabi Azad, among others.
"Every proposal for foreign investment in existing Indian pharmaceutical companies will go to FIPB till the time the Competition Act is amended," a source said.
The source further said that any foreign company acquiring an Indian firm, which had been producing essential medicines, would have to continue to do so till the time the Competition Commission of India was empowered to vet such deals.
"Whosoever acquires an Indian firm producing essential drugs will have to continue to manufacture it till CCI is empowered to take a view on such mergers and acquisitions," the source added.
It is also understood that although the amendment to the Competition Act 2002 was approved by the Cabinet in October this year, the government is checking the legality of inserting new sectoral specific clauses in the Act so that the CCI could direct foreign firms to produce a specific quantity of essential medicines after acquiring an Indian company.
"Moreover, it is also being examined whether the threshold limit for foreign investment in brownfield projects
that would require CCI clearance should be revised from the existing about Rs 750 crore limit," another source said.