Curtains down for FDI in Tobacco
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The CCEA on 8 April 2010 banned fresh FDI in
cigarette manufacturing, thus putting an end
to a much-debated issue. The CCEA decision
has now put cigarette manufacturing activity in the
list of activities prohibited for FDI. This ban is
expected to bring the policy in line with the
administrative decision not to grant industrial
licence for cigarette manufacturing. Under the
existing norms, 100 per cent FDI was permitted in
cigarette manufacturing, but an industrial licence
was required and the proposals needed to be
approved by the FIPB.
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In another development, the Union Government
has proposed stricter FDI norms in the housing and
township sector. It is likely to put in place a stringent
monitoring mechanism jointly with the Union
Ministries of Commerce and Urban Development to
ensure that FDI rules are strictly followed. At
present, 100 per cent FDI is allowed in this sector,
but with some riders. The Government has also
imposed a lock-in period of three years for
repatriation of investments made in this sector after
the minimum capitalisation requirements are
complete. Also, 50 per cent of the
project must be completed in five
years from the date of statutory
clearances and the investor is not
permitted to sell undeveloped plots.
Real estate companies looking for
FDI should set up a SPV for the
specific project and ensure that the
minimum capitalisation norms are
adhered to in the new company
floated for the project for which FDI
is being sought.
Meanwhile, significant changes are
soon to be set in motion with the
DIPP releasing six discussion papers
in mid-May 2010 on the country's
FDI policy. These papers are likely to
seek views from a cross-section of
people before formulating a policy.
One of the papers could be on much awaited
liberalisation of the FDI regime in the retail sector.
The other papers are likely to cover sectors like
defence, pharmaceutical and agriculture.
FDI Clearances:
| |
FDI inflows |
| Month |
(Rs.Crore) |
| Jan-09 |
13,346 |
| Feb-09 |
7,329 |
| Mar-09 |
10,023 |
| Apr-09 |
11,708 |
| May-09 |
10,168 |
| Jun-09 |
12,335 |
| Jul-09 |
17,045 |
| Aug-09 |
15,796 |
| Sep-09 |
7,326 |
| Oct-09 |
10,895 |
| Nov-09 |
8,081 |
| Dec-09 |
7,185 |
| Jan-10 |
9,386 |
| Feb-10 |
7,955 |
| Source: dipp.nic.in |
In February 2010, India received FDIs worth $1,717
million (approx Rs 7,955 crore) as compared to FDIs
received $1,466 million (approx Rs 6,450.4 crore) in February 2009.
During the 11 months from April 2009 - February
2010, India witnessed four per cent rise in FDI inflows
amounting to $24,680 million (approx Rs 1,17,880
crore) as compared to $25,374 million (approx Rs
1,13,002 crore) in the corresponding period of 2008-
09. Of the total FDI inflows the country received
during the current fiscal 2009-10, Services sector
accounted for 21 per cent at $20,015 (approx Rs
4,185 crore) followed by Computer Software &
Hardware sector (9 per cent), Telecommunications,
and Housing sector (8 per cent).
FDI clearances: 18 FDI proposals
cleared
The Union Government on 23 April 2010 on
recommendations of the FIPB cleared 18 FDI
proposals worth Rs 344.33 crore.
A major portion of the total amount of FDI cleared
during the month was accounted by the UK based
Abbott Lab's Indian subsidiary, Abbott Capital India.
The company intends to bring in Rs 308.20 crore to
acquire 20 per cent shares of drug-maker Solvay's
Indian business under an open offer
(from resident and non-resident
shareholders, including FIIs, NRIs
and OCBs).
Among the other proposals cleared
include Singapore based PCRD
Services Pte's Rs 23.97 crore
proposal for induction of foreign
equity in a JV investing company,
and Early Learning Centre's Rs 4.75
crore proposal to subscribe to an
Indian company to engage in single
brand retail trade.
The Union Government deferred
decision on 17 other proposals,
including the Jaipur IPL Cricket's
(JIPL) proposal to induct 100 per
cent foreign equity by way of issue
of shares for consideration other
than cash. Star India Holding's proposal to take a 49
per cent stake in TS Investment, which, in turn,
intends to acquire shares in Tata Sky has also been
deferred. Other proposals deferred by the
government are those of Etisalat DB, DLF Hilton,
Midday Multimedia, and S Tel.
Four other proposals including that of Saffron
Realty, Bangalore and Seonghwa Construction India
were reportedly rejected.
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