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Govt announces 2nd round of FDI reforms; 100% in telecom

The government decided to hike foreign direct investment (FDI) in a dozen sectors, including 100 percent in telecom and higher caps in insurance and defence sectors.

New Delhi: In big-ticket reforms push, the government on Tuesday decided to hike foreign direct investment (FDI) in a dozen sectors, including 100 percent in telecom and higher caps in insurance and defence sectors, to boost the sagging economy.

However, the high-level meeting chaired by Prime Minister Manmohan Singh did not take a view on raising FDI limits in sectors like civil aviation, airport, media, multi-brand retail and brownfield (existing firms) pharmaceuticals.

The second wave of reforms comes within 10 months of the government opening floodgates of foreign investment in sectors like multi-brand retail and civil aviation.

Today's announcement comes as the government cramps in reforms in the limited window it has before the assembly elections in states like Delhi this year and the Lok Sabha polls in 2014.

While the FDI cap in defence sector remained unchanged at 26 percent, higher limits of foreign investments in 'state-of-the-art' technology manufacturing will be considered by the Cabinet Committee on Security, Commerce and Industry Minister Anand Sharma told reporters here.

On what he meant by "state-of-the-art", Sharma said the term would be defined by the Defence Ministry.

All these decisions were taken by "consensus" during the meeting in which Ministers of Defence, Finance, Petroleum, Food and Consumer Affairs, Power and Home were present, he said, adding it will bolster investment, employment and growth.

"A Cabinet note will be moved immediately and the next meeting of the Cabinet will take up all these decisions," the Minister said.

In the contentious insurance sector, it was decided to raise the sectoral FDI cap from 26 percent to 49 percent under automatic route under which companies investing do not require prior government approval. A Bill to raise FDI cap in the sector is pending in the Rajya Sabha.

It was decided to allow 49 percent FDI in single brand retail under the automatic route and beyond through the Foreign Investment Promotion Board (FIPB) route.

For multi-brand retail, he said, as promised earlier there will be "greater clarity and comfort" for investors and this will be done "soon".

Besides civil aviation, Sharma said, no view was taken on relaxing FDI caps in airports, media and brownfield pharma.

In case of PSU oil refineries, commodity bourses, power exchanges, stock exchanges and clearing corporations, FDI will be allowed up to 49 percent under automatic route as against current routing of the investment through FIPB.

The decisions taken were based on recommendations of Mayaram Committee which had suggested relaxing investment caps in about 20 sectors, but the meeting today approved only in 12 segments.

In basic and cellular services, FDI was raised to 100 percent from current 74 percent. Of this, up to 49 percent will be allowed under automatic route and the remaining through FIPB approval.

A similar dispensation would be allowed for asset reconstruction companies and tea plantations.

FDI of up to 100 percent was allowed in courier services under automatic route. Earlier, similar amount of investment was allowed through FIPB route.

In credit information firms, 74 percent FDI under automatic route has been been allowed.

Replying to a question on "ownership and control" in companies having FDI, Sharma said a Cabinet note regarding this would be moved soon.

"We felt that there is a need to somewhat align the ownership and control because there have been a number of developments. One is SEBI's definition, second is Companies Act's definition. So, there are some changes brought in...I have discussed it with the Finance Minister and we have agreed on a formulation. I will be moving the Cabinet note very soon," he said.

The Rs 2,058 crore deal struck by Jet Airways to sell 24 percent of its stake to Abu Dhabi's Etihad Airways was put on hold by the FIPB which had sought more clarity on control and ownership of the Indian airline.

From Zee News

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