'Press Note 18 must stay'

Chambers concerned about ministry's suggestion to scrap the fdi regulation

A day ahead of the Cabinet secretary's meeting to discuss changes in a controversial FDI regulation under Press Note 18, the industry chambers, Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII), have expressed concerns on the finance ministry's suggestion to scrap Press Note 18 and said that it should continue.

FICCI has written a letter to Prime Minister Manmohan Singh urging him to continue with the regulation to ensure commercial fairness and safeguard the Indian entrepreneurs' future.

In the letter, FICCI president YK Modi said, "In absence of a conflict-of-interest clause in most Indian JVs, it is necessary that application of Press Note 18 continues."

Meanwhile, N Srinivasan, director general of CII also said that Press Note 18 is absolutely neccesary to protect the interest of Indian companies who put greater emphasis on human capital.

"Press Note 18 is very neccessary to protect the interest of both Indian firms and markets. While investment into the country is good, the government should not allow any speculative build-up that proves to be detrimental for the Indian JV's market capitalisation," he told Business Standard.

The Planning Commission has prepared a background paper on the note which will be discussed in the meeting. The finance ministry is in favour of scrapping the note, while the commerce and industry ministry which handles policy on FDI wants minor modifications.

FICCI said that this is vital to uphold commercial fairness, shareholders' and financial institutions' interests and the Indian entreprenuers' future specially for agreements entered into prior to 1998.

Mentioning instances of undue rent sought by certain companies under the guise of the legislation, Modi said that elaborate guidelines should be issued in consultation with the industry so that neither the Indian company nor the foreign collaborator could take undue advantage.

Citing success stories like Maruti Udyog, ITC and Pfizer India, Modi said this proactive policy intent of the government protected the interests of Indian entities from any restrictive moves of foreign collaborators and their taking any undue advantage of Indian JV's competitiveness in the international market.

FICCI also suggested inclusion of provisions similar to those of Foreign Investment Promotion Board (FIPB) where it has been allowing new 100 per cent wholly owned applications by foreign companies after all commercial relations with the Indian partners have ceased to exist.

The chamber has also informed the PM about the restrictions like sourcing and pricing of components, exports, brand name and copyright and sub licensing which foreign companies apply on Indian JVs.