Sept. 6 – Foreign firms must not be restricted in reinvesting their profits to local subsidiaries, according to a proposal submitted by the Department of Industrial Policy and Promotion.

“If companies are not permitted to fund downstream investments from internal accruals, such funds can be distributed as dividends and then the eligible amount repatriated and reinvested as foreign direct investment,” said the agency.

The suggestion comes after news that the foreign investment promotion board turned down a request by German communications company, Siemens, to remove the penalty for investments made from internal accruals.

According to Press Note 9, foreign company investment can go through the automatic route if the funds come from outside India but funds earned locally cannot be used for investment to discourage debt.