The Union Government is likely to ease norms governing investments by Indian companies having FDI, allowing them to invest internally generated funds in subsidiaries without prior approval. Currently, investment proposals funded through internal accruals of such companies also need approval from the FIPB.

However, such exemption is likely to be given only for investment in sectors on the automatic route that do not require FIPB nod. The Union Ministry of Finance is of the view that the FIPB approval for using internal accruals, or accumulated profits and depreciation charges, is an avoidable hurdle for companies keen to invest in the country.

FDI Clearances:

In July 2010, the Union Government on the recommendations of FIPB accorded its approval to 18 FDI proposals worth Rs 2,245.32 crore. The proposal that formed the major chunk of FDI clearances was of Transcend Infrastructure's Rs 1,932 crore plan to undertake the business of building towers, acquiring towers for securing management rights of towers for the purpose of leasing or licensing them to communication and broadcasting companies.

The other major proposals include that of Frigorifico Allana for setting up a manufacturing JV, involving FDI of Rs 125 crore, and of GETIT Infoservices involving FDI of Rs 96 crore for increasing foreign equity and undertake additional activity relating to publishing.

The government deferred 21 and rejected 10 FDI proposals. It deferred the proposals of companies like Wipro, Zee Entertainment Enterprises, Jagran Media Network, Essar Capital Holdings (India), UTStarcom India Telecom and Verizon Communications India.

Among the proposals, those of Mahindra & Mahindra, INX Media, Telcordia Technologies and Siemens were rejected by the government.

FDI Clearances (January - July 2010)

In the first seven months (January - July) of 2010, the Union Ministry of Finance cleared 126 FDI proposals worth Rs 8,674.64 crore. During the same period a year ago, the ministry had cleared 180 proposals worth Rs 5,679.46 crore. Though the number of FDI proposals which received green signals from the ministry dropped, the aggregate FDI proposals shot up by 52.7 per cent during the seven months of the calendar year 2010.

Other Developments:

The DIPP is considering a proposal which will enable foreign players repatriate profits from their investments in the country. The minimum lock-in period of three years will be applicable to the stipulated original investment, which is fixed at $5 million (approx Rs 23.25 crore). Any amount invested over this can be repatriated

According to the FDI regulations, a foreign investor has to bring in a minimum $5 million to participate in a JV with an Indian developer while the rest of the money can be brought in later, in portions. The original investment cannot be repatriated before a period of three years from completion of minimum capitalisation.

DIPP is expected to reverse its earlier notification issued in 2009, which had termed original investment as the "entire investment" brought in by the foreign company in a project.