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The model investment protection agreement for providing stability to foreign investors that is to be signed between the Centre and States will have provisions on dispute resolution and non-discrimination.
The Finance Ministry has finalised a model investment protection agreement, a senior official told BusinessLine adding: “It is currently with an inter-ministerial group and will be taken up by the Union Cabinet in the next few months.”
However, issues related to land and labour are still being worked out.
The proposed pact between the Centre and the States will help in better implementation of the new Bilateral Investment Treaty (BIT) by providing timely clearances to projects and ensuring that there are no major roadblocks that would hamper their roll out.
The move follows an announcement by Finance Minister Arun Jaitley in Budget 2016-17 to introduce a Centre State Investment Agreement. “This will ensure fulfilment of the obligations of the State governments under the BITs. States, which opt to sign these agreements, will be seen as more attractive destinations by foreign investors,” he had said.
Other provisions It would also include provisions such as a dispute resolution mechanism that investors can invoke before seeking the option of international arbitration and also against any attempt to take over of the project by a State government.
Officials pointed out that while the Centre has tried to improve the ease of doing business for foreign investors, projects often continue to face delays at the State level.
“By making States a signatory to such a pact, they will take an active interest in the projects and have a feeling of ownership towards them,” said a second official.
While it would not be binding on the States to sign the pact, officials hope that most would come forward to sign it to improve their own attraction. “For starters, we think that the States ruled by the NDA or the BJP will be more interested in signing the pact. Others may choose to join later,” he added.
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