Mini-Budget Part III takes shape

FDI floodgates open for four sectors today

The government is set to increase the foreign direct investment (FDI) limit in private banking, petroleum and scientific journals. It will also enhance the foreign investment limit in telecommunications.

According to government officials, the Cabinet and the Cabinet Committee on Economic Affairs are also expected to clear measures like the setting up of a farmers' commission, launching of radio and television channels for farmers, allocating funds for providing urban amenities in rural areas and a 10 per cent price subsidy on handloom products.

The Cabinet Committee on Economic Affairs will also consider a proposal put forth by the petroleum ministry to permit ONGC Videsh Ltd to acquire equity in the Delta project.

Although the FDI cap in private banks is being raised from 49 per cent to 74 per cent, the move is viewed as retrograde because it will restrict foreign investment to 74 per cent.

Foreign investment in banks can now go up to 98 per cent: 49 per cent as portfolio investment and 49 per cent as FDI. A 26 per cent Indian holding is likely to be insisted upon with the new guide-lines being applicable to fresh cases.

In scientific and technical journals, the government is planning to permit 100 per cent FDI against 74 per cent at present.

FDI in the telecom sector would be capped at 49 per cent, the officials said. But the overall ceiling, including portfolio holdings, will be raised to 74 per cent.

Telecom companies would have to be headed by Indians and their management would need to remain in Indian hands, they said.

In the oil sector, the NK Singh steering group had recommended a hike in the FDI limit in petroleum refining to 100 per cent from 26 per cent at present, in oil marketing to 100 per cent from 74 per cent and in oil and gas pipelines to 100 per cent from 51 per cent.

The sources said the government today rushed a Cabinet note on making the scheme for providing urban amenities in rural areas operational. President APJ Abdul Kalam had proposed the scheme in his Vision 2020 paper.

Last year, the Cabinet had turned down proposals to raise the foreign investment limits in various sectors in the wake of opposition from administrative ministries and security concerns.

Some ministers like Sharad Yadav, who had in the past opposed opening up further, are not expected to attend tomorrow's meeting.

Economy on a roll, says Jaswant

• The third and fourth quarter GDP growth rates will match, if not exceed, that of the second quarter
• The inflation rate for this fiscal will be between 4 and 4.5%
• The final fiscal deficit figures will be a "happy surprise" for everybody
• Key reforms agenda: review of FDI and FII investment limits, efficient tax system with minimum number of exemptions
• India will invest in new oil & gas sources around the globe