The Centre has rejected a proposal by BC Components International BV, which recently acquired the passive components business of Philips India Ltd, to adjust second-hand plant and machinery worth Rs 32 crore against equity.
The Indian subsidiary, BC Components India Pvt Ltd, had also proposed to establish a new subsidiary -- a 100 per cent export-oriented unit under the EoU scheme for manufacture of linear leaded resistors, in addition to the existing unit, near Loni Kalbhor, Pune, according to sources in the government.
The proposal was filed with the foreign investment promotion board (FIPB) which considered the case recently and then recommended rejection of the scheme of adjustment of cost of plant and machinery against equity since it did not fall within the existing policy guidelines. The decision was taken on the recommendations of the Secretariat for Industrial Assistance. Incidentally, the department of economic affairs (DEA) in the finance ministry had no comments to offer.
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There was, however, no objection to the proposal on setting up the EOU. The application was forwarded to the department of commerce for issue of letter of permission as the subject fell within the ambit of the department, the sources said.
Under its expansion plan, BC Components India proposed to adjust partial payment of only Rs 13 crore, of a total cost of second-hand machinery worth Rs 32 crore imported from the foreign collaborator BC Components International, towards equity. The company also submitted copies of the board resolutions to this effect.
But the SIA said equity against capital good is not encouraged. So the proposal may be considered in light of similar proposals in the past which were rejected by the FIPB. The board recommended rejection.
BC Components was granted foreign collaboration approval in May 1999 fore 100 per cent FDI amounting to Rs 14 crore for manufacturing and trading of passive electronics components. The company acquired 100 per cent holding in BC Components India Pvt Ltd in order to take over the passive components business of Philips India, in Loni, near Pune as a going business.
The company had then proposed to divest up to 10 per cent of the equity capital of BC Components India by issuing shares to its employees in the next three years, sources said.