The Hindu Business Line : Government studying fresh reforms package

Road ahead
100 pc foreign equity in specialised retail chains
Reduced Govt stake in nationalised banks
No bar on setting up of cos to provide contract labour

New Delhi , May 23

Having completed two years in office, the Manmohan Singh Government now has under its consideration a fresh package of reforms, which, if implemented, could see greater FDI flow in retail and the insurance sector as well as reduced shareholding by the Government in nationalised banks.

On the issue of FDI in retail, the proposal before the Government is to expand on the current policy of 51 per cent foreign equity in single brand to include all retail trade but with a non-majority foreign holding of 49 per cent only.

Alternatively, the proposal is to allow 100 per cent foreign equity in foreign branded, specialised retail chains.

Some international luxury brands - like Bulgari, Breguet (watches), Channel, Ralph Lauren, and Lladro - are already available in the Indian market but the sales are through the franchise mechanism without direct ownership by foreign companies.

The current policy of 51 per cent foreign equity in single brand will allow these brands to hold majority share in joint ventures, but the operations would have to be limited to a single brand.

In the insurance sector, the Government's move to increase the foreign equity cap to 49 per cent from the existing limit of 26 per cent has run into opposition from the Left parties and attempts are on to convince them to support an amendment Bill in Parliament to raise the cap.

Simultaneously, the Government is considering a proposal to allow 100 per cent foreign equity in special category of insurance companies, like those in the business of health or weather insurance and for all agriculture-related activities, including agro-processing.

There is also a move to revive the proposal for reducing Government stake in nationalised banks as well as SBI to 30 per cent but without changing their public sector character - i.e., retaining management control.

The previous Vajpayee Government was keen to reduce Government stake in these banks to 33 per cent, but the Congress had opposed it. Subsequently, the current UPA Government opted to reduce Government holding in public sector banks to a uniform 51 per cent over a period of time.

Another reforms measure under consideration pertains to the Contract Labour Act, where the move is to make the company providing contract labour to be responsible for meeting the obligations of labour law and not the company using such labour.

The proposal also suggests that hiring companies should be free to use contract labour for any purpose for which the supplying companies are willing to provide labour.

Besides, it states that there should be no restriction on the setting up of companies to provide contract labour.

More Stories on : Economy | Foreign Direct Investment | Retailing | Insurance

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