Govt mulls security rider for green-channel FDI

The government is considering introducing a security clause for companies that bring foreign direct investment through the automatic route.

The move is being considered as an interim measure until such time that a view is finalised on having an overarching legislation granting powers to the government to restrict investments in sensitive sectors.

Senior government officials said the need to bring in a security clause for investments through the automatic route had acquired more significance after the recent instance of Chinese company ZTE Telecom withdrawing its application from the Foreign Investment Promotion Board, and going directly to the RBI on the ground that its investment was permitted through the automatic route.

The investment of the Chinese company in question was first deferred, and then rejected by the FIPB, following which the company withdrew its application, and went directly to the RBI.

As per a structure being examined, changes are likely to be made in the format of the Foreign Collaboration - General Permission Receipts (FC-GPR) form issued by the Reserve Bank of India. The form is used by companies to self-declare that the investment is permitted through the automatic route.

At present, companies that bring in investments through the automatic route have to obtain a letter from the RBI certifying that the investment is under the automatic route. The company concerned then brings in the investment, and reports the investment by filling the FC-GPR form with the RBI within 30 days.

"With more and more sectors being put in the automatic route, there is a view that some clause has to be incorporated in the reporting format used by such companies. Internationally, countries like the US have such provisions. There is a view that such a clause can be fitted in the FC-GPR form itself," an official said.

Government officials said the outline of the security clause would be worked out by the Ministry of External Affairs, and once finalised by the National Security Council and other ministries concerned, would be implemented by the Department of Economic Affairs in conjunction with the RBI.