New Committee to Evaluate Investment Plans in Sensitive Sectors

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Jun. 29 – India is setting up a new committee that will evaluate the sensitive sector investment plans of local companies with foreign shareholders to confirm if a firm is truly Indian-owned.

The panel will study plans to invest in sensitive sectors such as telecommunications, aviation and single-brand retail looking at a company’s shareholding pattern and agreements.

It will be given up to one month to make an evaluation on the firm, afterwards the investment will be considered cleared.

“This overseeing mechanism is important to ensure that a company is controlled by Indians, if it wishes to invest in regulated sectors. Investing entities can have foreign holding of less than 50 percent, but control could be exercised by foreigners through Indian promoters. Therefore, while ownership is a matter of record, the matter hinges on whether the control of the entity is in Indian hands or not,” said a government official.

Top Indian companies like Bharti, Pantaloon and Reliance Industries are Indian-owned despite having foreign ownership and established retail outlets directly or through wholly-owned subsidiaries. Currently, Indian law does not allow foreign direct investment in multi-brand retail and only allows 51 percent foreign ownership in single-brand retail.