The Hindu Business Line : 100 pc FDI thru automatic route notified

JUST two weeks ahead of the Budget and against stiff political opposition, the Government on Monday issued notification permitting foreign direct investment (FDI) through the Reserve Bank of India's automatic approval route in a large number of new sectors.

The sectors include greenfield airport projects, distillation and brewing of potable alcohol, manufacture of industrial explosives and hazardous chemicals, laying of natural gas/LNG pipelines and cash-and-carry wholesale trading.

It has also allowed 100 per cent FDI in existing airports with prior permission from the Foreign Investment Promotion Board (FIPB) and subject to sectoral regulations notified by the Ministry of Civil Aviation. Similarly, 100 per cent FDI in manufacture of potable alcohol under the automatic route is allowed subject to licensing from State governments where the unit will be set up.

The Government also permitted 100 per cent FDI for manufacturing of cigarettes and cigars through the FIPB route for which licences will have to be issued by the State Government concerned under the Industrial (Development & Regulation) Act 1951.

The Department of Industrial Policy and Promotion (DIPP) on Monday issued Press Note 4 of 2006 series that also permits 100 per cent FDI through the automatic route in all manufacturing activities located within 25 km of the Standard Urban Area limits that require industrial licence under the I (D&R) Act, the notification says.

It has also permitted 100 per cent FDI through the automatic route for coal and lignite mining for captive consumption in all sectors. Earlier, this was permitted only for power generation. Companies setting up infrastructure relating to marketing of petroleum and natural gas and undertaking mining of diamonds and precious stones too have been granted the privilege of automatic approval for 100 per cent FDI, the press note said.

The same facilities have also been extended for power trading subject to compliance with the regulations under the Electricity Act of 2003 and for processing and warehousing of coffee and rubber.

This press note also extends the ambit of the automatic route to transfer of shares from residents to non-residents in financial services and where SEBI (Substantial Acquisition and Takeover) Regulations are attracted and in all cases where approvals are required from the RBI/SEBI or the Insurance Regulatory & Development Authority (IRDA). However, such transfers and acquisitions of shares through the automatic route will have to comply with the sectoral FDI guidelines and notified by the DIPP earlier, the notification states.

The note issued today further states that the Government has also removed the mandatory requirement of disinvestment of 26 per cent foreign equity in favour of resident Indian shareholders within a period of five years for companies engaged in B2B e-commerce.

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