In a Press Note, the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry also said that the Foreign Investment Promotion Board (FIPB) will decide on the contentious non-compete clause in special cases.
"The government has reviewed the position in this regard and decided that the existing policy would continue with the condition that 'non-compete' clause would not be allowed except in special circumstances with the approval of the FIPB," DIPP said in the Press Note.
The Press Note, signed by Additional Secretary Anjali Prasad, said the decision comes into force with immediate effect.
The department had earlier proposed strict norms to tighten the FDI policy for the sector amid concern that takeovers of Indian companies by multinationals have led to non-availability of affordable drugs in the country.
It had asked for a reduction in the FDI cap to 49 per cent from 100 per cent in rare or critical pharma verticals.
However, the union cabinet later dismissed the DIPP proposal.
India permits 100 per cent FDI in the pharmaceutical sector through automatic approval route in greenfield, or new, projects.
In September last year, the government cleared the US-based Mylan Inc's acquisition of Bangalore-based Agila Specialties, a subsidiary of Strides Arcolab.
Earlier, another US firm Abbot Laboratories acquired Piramal Health Care's domestic business and in 2008, Japanese Daiichi Sankyo bought out Ranbaxy, the country's largest drug maker.
--IANS (Posted on 08-01-2014)