DIPP to tweak FDI norms

The DIPP is mulling to remove the mandatory CCEA nod for FDI above Rs 1,200 crore, thus encourage more foreign investment in the country. A proposal note in this regard is likely to be forwarded to the Cabinet for approval.

The move has come in the wake of increase for FDI in greenfield projects as well as merger and acquisition deals. If approved, such large projects will be cleared at the sub-ministerial level of the FIPB, provided no national security angle is involved. This will fast-track the approval procedure and will save the foreign investors from prolonged regulatory clearance process and encourage FDI inflows. As per the present norms, all FDI proposals above Rs 1,200 crore have to be referred to the CCEA for approval.

Meanwhile, the Union Government plans to impose new entry route restrictions on FDI in the mining and realty sectors from security standpoint. Presently, up to 100 per cent FDI is allowed in realty projects through the automatic route with certain riders like a three-year lock-in on investments and minimum capitalisation of $5 million (approx Rs 22.5 crore). In mining, the government allows 100 per cent FDI through the automatic route. Under the automatic route, companies are allowed to bring in FDI into the country just by informing the Reserve Bank of India.

The discussion on allowing FDI in multi-brand retails has lately gained currency and is believed that the Union government is willing to allow FDI into this sector with some riders.

FDI inflows

India registered a 32 per cent fall in FDI in Jan- March 2011. The country received FDI worth $3.39 billion (approx Rs 15,255 crore) which has slipped by 32 per cent as compared to $4.96 billion (approx Rs 22,320 crore) of the same period a year ago. The sectors that attracted FDI include Services (financial and non-financial), Telecommunications, Housing and Real estate, Construction activities and Power. Mauritius, Singapore, the US, the UK, Netherlands, Japan, Germany and the UAE are the major investors in India.

FIPB clearances:

In May 2011, the government, on the recommendations of the FIPB, cleared 21 FDI proposals amounting to Rs 1,027 crore. A total of 47 FDI proposals were taken up by the FIPB, however, the board deferred decisions on 17 applications and rejected nine.

Oriental Tollways (Delhi and Haryana) got a goahead for induction of Rs 475 crore of foreign equity in Baring Private Equity Partners India. Also, approved was Darjeeling Organic Tea Estates' application for induction of foreign equity and a collaborator to carry out the business of production, distribution and export of tea. The proposal will bring in FDI worth Rs 93.37 crore. ACB (India) was given ex-post-facto approval for issue of warrants worth Rs 97.51 crore.

The other major proposals that were cleared include those of Netmagic Solutions, Jay Shree Tea and Industries and Augere Wireless Broadband India.