The Hindu : National : Rise in FDI cap on telecom, civil aviation

Online edition of India's National Newspaper
Friday, Jul 09, 2004

National

National

Rise in FDI cap on telecom, civil aviation

By Our Special Correspondent

New Delhi, July 8. To boost sagging foreign direct investment flows, the Finance Minister, P. Chidambaram, today proposed an increase in the sectoral ceilings for such investment in the telecom, civil aviation and insurance sectors.

The sectoral cap for FDI is sought to be raised from 49 to 74 per cent in telecom, from 40 to 49 per cent in civil aviation and from 26 to 49 per cent in insurance.

These steps are expected to meet the long-standing demand from these sectors for allowing higher FDI equity stakes.

The telecom sector has been seeking higher foreign investment specifically in the area of cellular phones while the rise in the cap for civil aviation will be welcomed by domestic airlines looking for inflows of both resources and technology.

"There is an urgent need for infusing huge amounts of capital in these sectors," the Finance Minister said, presenting the budget proposals for 2004-5.

Though the move was immediately decried by Left parties, Mr. Chidambaram said the UPA's common minimum programme declared that FDI would continue to be encouraged and actively sought particularly in areas of infrastructure, high technology and exporters.

He said: "Three sectors of the economy fully meet this description - telecommunications, civil aviation and insurance". Besides, he was of the view that FDI had the potential to add a competitive edge especially in the industrial sector.

In line with his stated intention of becoming the Minister for Investment after taking over the Finance portfolio, he also announced proposals to establish an Investment Commission and downsize the existing Foreign Investment Promotion Board (FIPB). "It is my goal to make the environment in India attractive for investors," he said. The proposed Commission to be headed by an eminent person would have the "broad authority of the Government" to engage, discuss with and invite domestic and foreign businesses to invest in India.

The FIPB, on the other hand, would be divested of many approval functions which could be put on the automatic route. This would leave FIPB as a "one stop service centre and facilitator".

He said it was also proposed to set up a National Manufacturing Competitiveness Council to provide a continuing forum for a policy dialogue to energise and sustain the growth of manufacturing industries.

The Council would be asked to suggest measures for enhancing competitiveness in the manufacturing sector. It might recommend industry-specific or sector-specific policy initiatives to enhance competitiveness.

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