Business   

Foreign direct investment norms further relaxed

NEW DELHI: In a significant policy liberalisation, the Union Cabinet on Wednesday approved further relaxation in the norms for foreign direct investment (FDI) in various sectors, threw open new areas such as commodity exchanges, credit information and aircraft maintenance for overseas investors while hiking the ceiling for investment in public sector oil refineries.

Briefing newspersons here after the Cabinet meeting, Information and Broadcasting Minister Priya Ranjan Dasmunsi said that while a number of areas have been placed on the automatic approval route -- particularly in civil aviation – the revised FDI policy would now permit 100 per cent foreign investment in maintenance, repair and overhauling (MRO) facilities for aircraft as also aviation training units.

Foreign investment to the extent of 100 per cent will henceforth be permitted in mining of titanium bearing minerals and up to 49 per cent in credit information companies. However, for investment in credit information companies, the permission of the Reserve Bank of India (RBI) will be necessary.

The revised FDI policy has also done away with the norms of 26 per cent compulsory equity divestment in fuel and gas trading ventures. Hitherto, 100 per cent FDI was allowed on the automatic approval route, subject to the condition that 26 per cent equity in such ventures is disinvested within five years in favour of an Indian partner.

The ceiling on FDI in public sector refineries has also been raised to 49 per cent from its existing cap of 26 per cent. It may be recalled that a couple of months ago, the Government had made a one-time exception to permit steel baron Lakshmi Mittal to pick a 49 per cent equity stake in HPCL’s refinery at Bhatinda in Punjab.

In a bid to boost the growth of industrial estates, the Cabinet also decided to exempt foreign investors from certain regulatory norms such as minimum capitalisation and the three-year lock-in period. Alongside, for construction development projects, investments by registered foreign institutional investors (FIIs) under the portfolio investment scheme are also to be treated as distinct from FDI. In effect, the investments by FIIs would now be outside the purview of certain restrictive norms applicable to FDI. However, the government is to provide a detailed clarification in this regard later.

“The approval would help in higher FDI inflows through liberalisation of the FDI policy and reduction of levels of approvals, which are no longer worthwhile,” Mr Dasmunsi said.

As for commodity exchanges, the 49 per cent FDI ceiling has been divided. While the investment ceiling for FDI has been pegged at up to 26 per cent, that for FIIs has been fixed at 23 per cent, subject to the condition that no single investor would be permitted to hold a stake of more than five per cent.

For companies engaged in credit information services (CICs), FIIs would be allowed to invest up to 24 per cent in firms listed on the stock exchanges and this would have to be within the 49 per cent ceiling. Besides, ‘Credit Reference Agencies’ are to be deleted from the list of non-banking finance companies (NBFCs) activities permitted for FDI up to 100 per cent under the automatic route.

In the civil aviation sector, the existing FDI cap at 49 per cent on the automatic route and 100 per cent for NRIs is to continue with no direct or indirect participation by foreign airlines and it has been reclassified as ‘Domestic Scheduled Passenger Airline’ sector. For non-scheduled airlines, chartered and cargo airlines, the FDI cap is at 74 per cent on the automatic route and 100 per cent for NRIs. The same norms are to apply for ground handling services. Subject to sectoral regulations and security clearance.

Considered as one of the most favourite investment destinations, the FDI inflow into is expected to touch $ 30 billion this fiscal.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Foreign direct investment norms further relaxed
Close ended MF schemes: SEBI prunes issue expenses
Volvo bus unit on stream
‘IT is time India joins the global e-conomy’
NTC to revive entyce
IOB’s Q3 net up
Sensex extends losses
Rupee edges up
Exchange Rates
Bullion Rates
34 FDI proposals cleared
Hyundai plans mini car in India
Govt. to infuse Rs. 900 cr. in RRBs
Reliance Power to allocate shares today
IMPAL net profit up
NTPC pays 27 p.c. interim
SAIL to supply equipment to HEC
35 p.c. interim from MMTC
Bharti gets additional spectrum
Andhra Bank net profit at Rs. 159 cr.

Copyright © 2008, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu