Local partners' nod for ventures reviewed

The core group of the Foreign Investment Promotion Board (FIPB) met on Tuesday to discuss the the issue of Press Note 18.

The meeting sought to deliberate what changes it can bring to the Note's controversial clause which mandates the local partner's consent for an existing or erstwhile foreign partner to set up another company in India.

A high ranking government official, who attended the meeting, said no decision on the Note had been taken.

"We discussed the issue. We may have further deliberations until a final decision is arrived at," he said, indicating that there was a definite move to relax the stipulation in favour of foreign investors.

Several of them have already made representations to the government, stating that the current provision is being used by some Indian firms to armtwist their foreign partners.

The issue of relaxation suggested by the finance ministry has gained momentum after the department of industrial policy and promotion (DIPP) in the industry ministry expressed the view the provision might be redefined so that local companies with poor financial track record were not allowed to misuse it.

DIPP, the author of the Note, maintains that the clause is not prohibitory and nowhere does the clause say that the consent of the the local partner is mandatory. Instead, the clause only bars foreign firms from taking the automatic route.

The date for the next meeting of the FIPB core group could not be ascertained. But the government may take a fast decision, considering the growing number of cases where the clause has been triggered.

In the recent past, the FIPB has cleared some of the proposals by foreign companies, despite an objection by the local partner, after determining that the objection was not valid.