The Telegraph
Since 1st March, 1999
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All fired up for foreign funding blitz

New Delhi, Jan. 14: The government is likely to ease the limits on foreign direct investment (FDI) on petroleum refining and marketing, technical journals, telecom, airports and airlines, banking and insurance sectors despite objections from the intelligence bureau and even from within the ruling party.

According to senior finance ministry officials, the government will relax norms to allow up to 100 per cent investment in petroleum refining and marketing, now capped at 74 per cent.

It also wants to raise the foreign stake in banking and insurance sectors from a current 49 per cent and 26 per cent to 74 per cent and 49 per cent respectively.

In the case of technical journals, it wants to raise the FDI limit to 100 per cent through the automatic route from the current level of 74 per cent. Sources said this will serve as a precursor to relaxing FDI norms further in the print and broadcast media where it is now pegged at 26 per cent.

Similarly, it wants to increase the ceiling on foreign stake in airlines from 40 per cent to 49 per cent, and remove a bar on foreign airlines from investing in domestic air corporations.

It also wants to hike the FDI limit in airports through the automatic route to 100 per cent. Currently, 100 per cent is allowed but with permission from the Foreign Investment Promotion Board (FIPB).

The IB has voiced serious objections to throwing open the telecom and aviation sector. Allowing higher FDI in these two vital sectors is viewed by security agencies as detrimental to Indian interests, opening up the possibility of foreign agents taking over control of vital installations during periods of crisis.

Besides the IB, the defence ministry has voiced a preference for the current policy of routing investments which gives management control through the FIPB and, for some mega-investment proposals, through the cabinet. The defence ministry, it is learnt, also has serious doubts about the advisability of allowing 100 per cent in the oil sector to foreign players.

The ministry feels that control over these two vital sectors cannot be ceded without appropriate checks. The defence ministry feels the Iraq war has made the security scenario in the sub-continent more volatile than before and the Indian government would be well advised to be more cautious about allowing automatic entry into vital sectors. Instead, it is advocating a policy of case by case approvals.

The BJP party top brass are not in favour of plans to raise FDI in insurance firms. The . K. Singh panel also wanted FDI in insurance raised to 49 per cent from a current 26 per cent, but party brass is against this as it feels this would hand over effective control of much of the insurance sector and the huge funds it commands to global multinationals which could then virtually dictate the way long-term investments are made here. They fear a hasty decision on this could hit the partyís chances at elections to state assemblies coming up early next year.

Even when the insurance sector was being thrown open a few years back, the BJP MPs had virtually revolted against the Vajpayee-led cabinetís decision to allow a stake higher than 26 per cent in insurance firms. It had ensured a very strict interpretation of the term Indian ownership of 74 per cent to ensure that foreign holdings beyond the 26 per cent allowed does not creep in even through the back door.

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