Government push to reforms

FDI norms to be overhauled.

A group of ministers (GoM) will undertake a comprehensive review of foreign direct investment (FDI) norms in key sectors like retail, power trading, airports and mining.

The Cabinet Committee on Economic Affairs (CCEA), which met today to discuss the existing foreign investment regime, mandated the GoM to review the entire FDI policy, including allowing foreign investment in retail trading. The group will be formed over the next day or two.

Finance Minister P Chidambaram told reporters after the CCEA meeting that the matter was referred to a GoM as it was felt that more precision was needed in formulating FDI guidelines.

"The GoM will need one meeting, some time next week, to evaluate the proposal," Chidambaram said.

A Cabinet minister told Business Standard that the CCEA had initially thought of deferring a decision on the issue as key ministers, including Agriculture Minister Sharad Pawar, Petroleum Minister Mani Shankar Aiyar and Defence Minister Pranab Mukherjee, were not present at the meeting.

But it was later decided to refer it to a GoM which would review the FDI policy in its totality instead of limiting it to the proposals put forward by the commerce and industry ministry.

"Some ministers pointed out that there was a need to review the existing practice of issuing the FDI policy in the form of Press Notes. There was also a view that the language for allowing FDI in a sector, such as 'subject to sectoral rules', needed to be changed," a minister said.

The department of industrial policy and promotion (DIPP) has proposed allowing FDI in the potable alcohol business, for which an industrial licence is required.

It has recommended allowing resident Indians to transfer their shares to non-resident Indians through the automatic route by doing away with the need for a Foreign Investment Promotion Board clearance.

The DIPP has also proposed to do away with the mandatory disinvestment clause applicable to foreign companies in favour of Indian players or the public in sectors like tea and business-to-business e-commerce.

Besides, the DIPP has recommended 100 per cent FDI in power trading, a sector which still remains closed to foreign investment.

It has also proposed raising the FDI limit for mining of diamond and precious stones, from 74 per cent to 100 per cent, through the automatic route. It has also talked of a similar hike for greenfield airport projects.

A proposal to eliminate the need for FIPB clearance for cash-and-carry wholesale trading has also been recommended.