Drops 177 press notes in draft FDI policy.
On the eve of Christmas, and a long weekend, the Union government went into an economic reforms overdrive. The Cabinet cleared proposals for public enterprise reform, while the Union ministry for commerce and industry came forward with a draft consolidated foreign direct investment (FDI) policy replacing 177 press notes and notifications. The Centre also cleared proposals strengthening copyright laws.
In a bid to further empower mega central public sector enterprises (CPSEs), the Navaratnas, and help expand their operations at the global level, the government announced a “Maharatna Scheme”.
“The Maharatnas will be given more freedom over Navratnas and will have powers to make equity investment to establish joint ventures, wholly owned subsidiaries and undertake mergers and acquisitions, in India and abroad, subject to a ceiling of 15 per cent of the net worth of the concerned CPSE in one project, limited to an absolute ceiling of Rs 5,000 crore,” Information and Broadcasting Minister Ambika Soni announced after the Cabinet meeting here today.
Soni also said the Cabinet had approved a proposal of the Human Resource Development Ministry to amend the Copyright Act, 1957. “The amendments will give clarity, remove operational difficulties and address the newer issues that have emerged in the context of digital technology and the internet.”
| AT A GLANCE |
| * Announces consolidated FDI policy |
| * Replaces 177 press notes, notifications |
| * Announces Maharatna Scheme to empower central public sector enterprises |
| * Approves proposal to amend Copyright Act 1957 |
| * Says issue of foreign ownership in Indian banks to be resolved soon |
In a separate announcement, Commerce and Industry Minister Anand Sharma told reporters, “A consolidated FDI policy will be one document that will help global investors get more clarity of the FDI rules in the country rather than going through 177 press notes. It is not about changing or amending the policy or doing away with sectoral caps.” The draft guidelines, which had been released for stakeholders’ consultation till January 31, will be finalised by March 31. The new consolidated FDI policy will then be subjected to inter-ministerial review after every six months.
FDI policy
“India remains the most favourable destination for FDI. The consolidated FDI policy will only help in accentuating the flow into the country,” Sharma said. He added that the government was not considering removing the ceiling of investment permitted in certain key sectors such as retail, telecom and aviation. In February this year the government, which is in its second term at present, sought to rationalise the methodology of calculating FDI coming into various sectors of the economy. This has led to significant confusion among investors, especially in the banking sector.
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On February 11, the government issued press notes 2 and 3, charting out the method to calculate downstream FDI in terms of transfer of ownership and control in sectors or companies having FDI ceiling. It also charted out the role of Foreign Investment Promotion Board in determining the amount of FDI. This led to widespread criticism of the new press notes among Indian as well as foreign entities. Under pressure, the Department of Industrial Policy and Promotion (Dipp) issued a clarification on February 27. To provide greater impetus to the FDI policy, the government recently launched an initiative called “Invest India”, to be headed by Ajay Shankar, secretary, Dipp.
The government has set a target of achieving $50 billion FDI annually by 2012 and $100 billion by 2017. In order to fulfil this, a high level committee (HLC) consisting of state industry ministers was set up to make all the states in India conducive for global investment.
FDI inflows topped $1.74 billion last month, up 60 per cent from November last year when FDI inflows were $1.08 billion. However, cumulative FDI during April-November declined to $19.38 billion from $19.79 billion in the corresponding period last fiscal.
Indian industry hailed the new initiative taken by the government to create a consolidated FDI policy framework. According to Ficci, this would bring foreign investors under a single reference point. The chamber, however, added that the government should actively look into speeding up the pace of implementing the projects to utilise the full potential of inflow of funds. “In the absence of efficient project implementation, the pace of FDI flows could slacken in the future. Procedural reforms, particularly at the state level, are, therefore, the need of the hour,” Amit Mitra, secretary general of Ficci, said.
Maharatnas
The Navratna companies have Rs 1,000 crore as the absolute ceiling for taking own investment decisions.
“The overall ceiling on such equity investments and mergers and acquisitions in all projects put together will not exceed 30 per cent of the net worth of the concerned CPSEs. In addition, the Boards of Maharatna CPSEs will have powers to create below Board level posts up to E-9 level,” Soni announced.
The Cabinet also decided that this status would be given only to those Navratna companies that were listed on Indian stock exchange with minimum prescribed public shareholding under Sebi regulations, an average annual turnover of more than Rs 25,000 crore and an average annual net worth of more than Rs 15,000 crore during the last three years. It should also have an average annual net profit after tax of more than Rs 5,000 crore during the last three years with “significant global presence or international operations”.
Even as this scheme would not bear any additional expenditure on the government exchequer, it is seen as an achievement of one of the three targets of the Department of Public Enterprises for its first 100 days programme.
Copyright Act
The amendments to the domestic Copyright Act would bring it in conformity with the World Intellectual Property Organisation (WIPO) Internet Treaties — WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT) — which have set the international standards in these spheres.
To bring it in conformity with WCT and WPPT, a new section would be added to the existing act “to ensure protection to the right holders against circumvention of effective technological measures applied for purpose of protection of his rights like breaking of passwords etc, while maintaining an appropriate balance between the interests of the right holders on the one hand and of technology innovators, researchers and educational institutions on the other.” The “Moral Rights” of performers would be another new feature.
Amendments would also aim to ensure technological measures did not act as a barrier for further development of the technology. “The period of copyright for photographers is proposed to be enhanced to “Life plus sixty years” instead of only sixty years as at present,” Soni said.
For the first time, the proposed amendments would enable the authors of cinematographic, musical and literary works to earn royalty if their works were used for commercial purposes. The amendments would give “independent rights to authors of literary and musical works in cinematograph films, which were hitherto denied and wrongfully exploited by producers and music companies”, Soni announced.
Addressing the concerns of India’s music and film industry, the amendments would give statutory licence for version recordings and authorship. Term of copyright for cinematograph films was extended by making the producers and the director as joint authors. A copyright term of 70 years to principal director automatically extended the copyright term for producers for another 10 years, provided he entered into an agreement with the director.
Amendments were also introduced to bring down the cost of Braille text, talking text, electronic text and large print to allow cheaper production of copies of copyright material in formats specially designed for the physically challenged.