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DIPP opposes restriction of JVs with small foreign stake enter prohibited sectors
23 September 2010: The DIPP has opposed the move to keep companies with even minuscule levels of foreign funding out of sectors such as multi-brand retail, atomic energy, real estate, chit funds and lottery, which are not open to FDI.
The idea behind banning firms that have foreign investment in them from investing in prohibited sectors through subsidiaries is to prevent indirect access to foreign players to these sectors.
The DIPP has urged to the Union Government to reconsider the proposal, which was recommended by a group of officers looking into the new policy. It is of the view that the move to bar JVs from sectors where FDI is not allowed is inconsistent with the current policy environment.
According to the existing FDI policy, JVs can invest in the prohibited sectors as long as foreign investment in them is below 49 per cent.
The first consolidated FDI circular of 2010 was announced on 31 March 2010 and the next one is scheduled to be published by the end of this month. Since 29 February 2010, various interpretations of the new guidelines allowing indirect FDI and the implications have been the subject to discussions between the finance ministry and the DIPP.
Source: Economic Times