FDI window to be opened up further

Press Note 18 to be diluted, more sectors on automatic route.

The government is set to remove some of the restrictions imposed by Press Note 18 on foreign companies that have existing joint ventures in India but want to strike out alone in allied areas.

Steps to include more sectors in the automatic route and streamlining the functioning of the Foreign Investment Promotion Board (FIPB) are also on the anvil.

The clause in Press Note 18 stipulating FIPB approval in case of "previous joint ventures ... in the same or allied fields in India" would now be limited to the "same field" only, senior government officials told Business Standard.

Press Note 18 requires foreign investors with existing tie-ups in India to seek a no-objection certificate from their domestic partner for starting a new venture.

The officials said the concept of "allied" was being done away with, as the term was considered too large and vague. Under the National Industrial Classification (NIC) code, 1987, industries were classified up to the four-digit level. While 'same' activities have been prescribed at the three-digit level, 'allied' activities were in the four-digit category.

A company seeking permission to set up ventures in the 'same' category, say for manufacturing transformers, will have a specific four-digit code, 360.2, as per the NIC, but the same activity under 'allied' would be clubbed under the three-digit code, 360, as "manufacture of electrical industrial machinery, apparatus and parts thereof".

The government will also put the onus on the Indian partner to prove that the new venture proposed by the foreign investor would jeopardise the existing entity. Also, joint ventures which were no longer valid or operational would be out of the ambit of Press Note 18.

A decision on introducing a sunset clause, allowing the foreign investor automatic investment clearance after a specified period, was being considered.

Officials said a decision on including more sectors on the automatic route would be taken by the core group of secretaries on FIPB. The group was also expected to discuss streamlining the FIPB's functioning to ensure easier approval of foreign investment proposals.

The measures were being initiated to make India a more attractive destination for foreign investors in the backdrop of the recent statements by Prime Minister Manmohan Singh. He had estimated that over the next decade India would need an investment of $150 billion in infrastructure.