The Telegraph
Since 1st March, 1999
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FDI’s better when it’s a torrent
- Panel wants higher caps in telecom, aviation, insurance and plantations

New Delhi, Sept. 6: The steering group on foreign direct investment (FDI) has recommended full overseas ownership in petroleum, private banks and real estate, besides suggesting higher caps for telecom, civil aviation, insurance, small-scale units and plantations.

Releasing the report of the steering committee set up in August last year under the chairmanship of N.K. Singh, deputy chairman of Planning Commission, K. C. Pant, said an 8 per cent GDP growth in the Tenth Plan will be achieved if India can draw $ 8 billion every year.

The committee recommended that sectoral caps should be completely removed in refineries, petro retailing, oil exploration, airports, banks and real estate.

In civil aviation, the limit should be raised from 40 per cent to 49 per cent (including permission to foreign airlines), in basic and mobile telephony from 49 to 74 per cent and in insurance from 26 per cent to 49 per cent.

The committee wants FDI made automatic, instead of allowing it through the “automatic route”. However, it said the policy of keeping foreign investment out of retailing should be persisted with. “The retail sector in India is dispersed, wide spread, labour intensive and disorganised. It is not thought desirable at present to lift the ban on FDI here,” the report said.

Later, Singh, a member of the plan panel, said his group did not feel the need to call for a change in the 26 per cent FDI allowed in print media. Disinvestment, he said, has not helped bring foreign investment because there are no credible regulatory authorities in real estate, food processing, power, oil and refineries.

The report, submitted to Prime Minister Atal Bihari Vajpayee, has suggested framing a foreign investment promotion law, which incorporates and integrates aspects relevant to promotion of FDI. The document will now go to the group of ministers (GoM).

Elaborating on the law, Singh said the existing two laws—Fera and Fema—were basically restricted to the regulatory aspects and there was at the moment no separate law to promote foreign investment. The foreign investment promotion law will be administered by the ministry of industry and have a two fold objective of promoting investment and according national treatment to foreign investors, he said.

Responding to a query on the committee’s stand on FDI in print media, Singh said “the group has not recommended any change in the existing policy and therefore the group did not go into the details of the sector.”

Members of the group comprised the Union finance secretary, industrial policy and promotion, secretary, ministry of external affairs, the Reserve Bank deputy governor, and chief secretaries of Uttar Pradesh, Andhra Pradesh and West Bengal, besides CII and Ficci.

The Prime Minister said the group of ministers would consider the recommendations made in the report soon.

Barons beam

Telecom titans lauded the N.K. Singh committee’s proposal to raise the foreign direct investment limit in the sector from 49 per cent to 74 per cent.

Bharti group chairman and managing director Sunil Bharti Mittal said: “This is a good move and we hope the government will respond positively to these recommendations. It will help the sector to get the enhanced FDI.

Vikash Saraf, CEO Essar Telecom business, said the report is a step in the right direction, and that it would enormously help growth in the telephone industry.

Telecom companies have long wanted a hike in FDI cap over the past few years. The ceiling in various sub-sectors of the sector currently varies between 49 per cent and 100 per cent There is no FDI cap in case of telecom equipment manufacturing, telecom services like internet (without gateways), infrastructure providers (IP-I), email, voice mail and IT-enabled services.

However a FDI cap of 74 per cent is applicable in case of internet (with gateways) Infrastructure providers (IP-II) providing end-to-end bandwidth and radio paging services.

There is a 49 per cent FDI cap in case of fixed line, cellular mobile, Very small aperture terminals, national long distance, international long distance and global mobile personal communications services. FDI cap in telecom sector is reviewed by the government depending upon the investment needs and security considerations.

“The move will hopefully usher in more foreign investment in the sector and help improve the growth in future,” said Mahendra Nahata, group chairman and managing director Himachal Futuristic Communications Ltd.

An Escotel official said: “Inflow fund required for this entire set up is very high and that type of funds are not coming through.”

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