Mandatory divestment may go for tea, e-com

DIPP had prepared a comprehensive note on rationalising FDI norms.

The government may do away with the mandatory disinvestment by foreign companies in favour of Indian players or the public in sectors like tea and business-to-business e-commerce.

The proposed move aims at making these sectors more attractive for foreign direct investment.

Officials told Business Standard today that the department of industrial policy and promotion (DIPP) had prepared a comprehensive note on rationalising FDI procedures for the Cabinet to consider.

At present, 100 per cent FDI is permitted in e-commerce, provided such companies divest 26 per cent equity in favour of the Indian public in five years, if these companies are listed in other parts of the world.

Similarly, in the tea sector, 100 per cent FDI is allowed subject to compulsory divestment of 26 per cent in favour of an Indian partner or the public within a period of five years.

Barring the tea sector, no FDI or foreign institutional investment is permitted in agriculture or plantations.

"The withdrawal of this clause is not expected to have any adverse impact on these sectors," said an official, adding that the clause was initially inserted in the FDI policy to make a foreign company share part of its profits earned with the help of the Indian public or an Indian partner.

Officials pointed out that no proposal pertaining to B2B e-commerce or the tea sector had come to the government since 2000.