Aviation FDI Hears Freedom Call.

New Delhi, March 20: The government may allow foreign airlines to pick up minority stakes in domestic carriers, as part of its upcoming FDI policy review later this month. Rules are also likely to be relaxed for foreign firms who are required to seek the approval of their domestic joint venture partners to set up units in the same area of business. However, opening up of multi-brand retail may not happen.

Moreover, the cabinet committee of economic affairs may take up for its approval foreign direct investments (FDI) of more than Rs 1,500 crore, against Rs 600 crore now.

Projects below Rs 1,500 crore will be considered by the Foreign Investment Promotion Board, which will reduce the time for clearing the proposals, officials said.

Civil aviation secretary Nasim Zaidi has said his ministry has received a request from the department of industrial policy and promotion (DIPP) — the nodal agency on FDI policy — to allow foreign airlines to invest in this country. He said the proposal “was under consideration and a decision on this would be taken soon”.

However, sources said, “Opening up of multi-brand retail, for which the discussion paper was also mooted by the government, may not find mention in the FDI revision nor extending the ceiling on defence production.”

To make foreign direct investment rules simple and easy to understand for investors, the DIPP — which is under the commerce and industry ministry — had compiled all the related policies into a single document. The policy is reviewed once in six months.

“The next edition of the consolidated FDI Policy circular — Circular 1 of 2011 — will be issued on March 31, 2011, which will incorporate all the changes effected in the FDI policy post-issue of Circular 2 of (September) 2010,” officials of the DIPP said.

The new norms could make it easy for foreign investors to get the approval of their domestic partners to set up units in the same area of business.

Press Note 1 of 2005 had sought to protect the interests of domestic companies in joint ventures by ensuring that the foreign companies obtain the permission of their local partners, if they decide to go it alone, or partner another Indian company in the same line of business as the existing venture.

However, many argued that this norm should be relaxed to attract more FDI at a time foreign investment has been declining.

Sources said inter-ministerial discussions on FDI in multi-brand retail had yielded several proposals such as partial opening, phased opening, entry in metros or tier-II cities, back-end cold chain criteria for quid-pro-quo opening up of outlets and restriction on the number of outlets. So far, no final decision has been taken.

Analysts said the opening of the retail sector was a politically sensitive issue. With the upcoming Assembly elections in five states, where the Congress-led UPA has stakes, it is unlikely that a decision will emerge on allowing FDI at the cost of political goodwill.

The present FDI regime allows 51 per cent foreign investment in single-brand retail and 100 per cent in wholesale cash-and-carry where global players such as Wal-Mart and Carrefour are allowed to sell to bulk customers such as hotels, canteens and local retailers.

US President Barack Obama and other leaders have expressed their views in favour of opening up the retail sector. Global retailers such as Wal-Mart, Carrefour, Tesco and Metro are keen to enter multi-brand retail, arguing that it would help to contain food inflation, besides creating thousands of new jobs.

FDI during April-December this fiscal declined 23 per cent to $16 billion from $20.8 billion in the same period last year.
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Source : telegraphindia.com