DIPP: Allow JVs with Small Foreign Stakes to Enter Restricted Sectors
Sept. 23 – The Department of Industrial Policy and Promotion is voicing its opposition to a new proposal that would forbid companies with small levels of foreign funding to be allowed to enter restricted sectors.
The agency is urging the finance ministry to reconsider the proposed policy that would keep out companies with even the smallest amounts of foreign investment from sensitive sectors like multi-brand retail, atomic energy, real estate, lottery, and a type of savings scheme practiced in India called chit funds.
DIPP also suggested that foreign investments be studied by the foreign investment promotion board (FIPB) plus an oversight body.
The current FDI policy dictates that joint ventures be allowed to enter sensitive sectors as long as their rate of foreign investment is under 49 percent, although changes were made to the rule last year forbidding indirect foreign ownership in sensitive sectors.
If the new proposal is made into law, it would render many companies in violation.
DIPP secretary R.P. Singh wrote in a letter to the finance ministry: “This would imply that Indian companies, even with minimal levels of foreign investment, cannot invest downstream into prohibited sectors, even though, for all practical purposes, they may be Indian companies.”
“Adopting such an approach may create an anomalous position with respect to some major existing Indian-owned and controlled companies,” he added.
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