New Delhi: Shedding earlier reservations
over some aspects of the controversial new FDI guidelines, the
Finance Ministry now says it does not have any objection to
new rules that changed the criteria for calculation of foreign
ownership in a company and its downstream investment.
However, whether the new scenario will pave the way for
Bharti-MTN deal to comply with sectoral caps is not yet clear.
"We are not opposed to Press Notes (2,3 and 4). Earlier,
we may have some opposition to some aspects of these Notes. We
are doing everything to implement these notes, approved by the
Cabinet," a key source said here.
He said the Foreign Investment Promotion Board (FIPB) has
been approving cases, based on these notes.
When asked whether Bharti-MTN deal will require FIPB
permission to go through or will it breach the sectoral cap as
per the new norms, he said the board has not taken a call on
it as the deal has not come to it.
The deal to create the world`s third largest telecom
company with 200 million subscribers and over 20 billion
dollars of revenue is still in negotiating stage and is yet to
fructify as it has to cross some hurdles, including dual
listing of MTN on South African and Indian bourses with equal
Earlier, the Department of Economic Affairs in the
Finance Ministry had objected to some aspects of the new
foreign investment norms, saying they rendered sectoral FDI
The Reserve Bank of India had also opposed the new press
notes, saying the norms could encourage investors to set up
companies in which non-resident entities hold 49 percent and
skirt sectoral FDI limits.
The Department of Industrial Policy and Promotion (DIPP)
under the Commerce Ministry issued these press notes outlining
the revised FDI guidelines.
DIPP issued press notes 2 and 3, dealing with calculations
of foreign investment in a company and investment in
downstream entities. Since there were doubts regarding these
issues, DIPP came out with Press Note 4.
These notes have replaced the conventional proportionate
method of computing foreign indirect equity by the parameter
of beneficial ownership and control of entities at each stage
As per press note 3, foreign investment will include all
types of foreign investments -- foreign direct investment,
investment by FIIs, NRIs, ADRs, GDRs and convertible
preference shares. This was not the case earlier.
After these press notes, even if unrelated foreign
investors in totality hold more than 50 percent in an Indian
company, it will be treated as foreign investor.
As per press note two, FDI routed through an Indian
company owned and controlled by resident Indians will not be
taken into account while calculating sectoral limits.