More goodies from poll vault

India Inc can invest 100% of net worth abroad, ECBs up to $500 mn may be on automatic route

After giving customs and excise duty relief to corporates on Thursday, the government followed it up yesterday with a string of announcements aimed at making India Inc more competitive.

In the morning, Prime Minister Atal Bihari Vajpayee announced the removal of the ceiling of $100 million on overseas investments, allowing Indian companies to invest up to 100 per cent of their net worth either through an overseas joint venture or through a wholly owned subsidiary.

He said this while inaugurating the Pravasi Bhara- tiya Samaroh, a three-day conclave of non-resident Indians and people of Indian origin. In the recent past, several Indian companies from sectors like information technology, pharmaceuticals and even manufacturing have announced their intention of acquiring companies, assets and brands abroad.

The Prime Minister also chose the occasion to announce the government had decided to permit Indian corporates to go global in the agricultural sector.

The existing restrictions on Indian corporates for undertaking agricultural activities abroad, whether directly or through overseas branches, will be removed. "This will enable Indian companies to take advantage of global opportunities and also to acquire technological and other skills for adoption in India," Vajpayee said.

Later in the day, Finance Minister Jaswant Singh said the guidelines for external commercial borrowings would be relaxed. Government officials indicated that proposals of up to $500 million could be put on the automatic route, as against $50 million at present.

This will also include small and medium enterprises, provided the tenor is at least five years. He added the new scheme would minimise discretionary elements, simplify and rationalise procedure and promote transparency in processing foreign loan applications.

Also, Indians have been allowed to remit up to $25,000 abroad. The country's foreign exchange reserves of over $100 billion have given the comfort to the government to take these decisions. All these decisions are being seen as a step towards full convertibility of the rupee.

Singh also announced steps to make available cheaper credit worth Rs 50,000 crore for infrastructure projects and Rs 10,000 crore to small and medium enterprises.

Under the scheme being planned for the infrastructure sector, credit for both term loans and working capital to projects in power generation, ports, airports, roads, tourism, telecommunications and urban infrastructure will be provided at 200 basis points below the prime lending rate over the next three years.

Similarly, SIDBI will extend credit to small and medium enterprises at 200 basis points below the prime rate. In both the cases, the deficit will be made up by the government.

"A consortium of banks and financial institutions, under lead institutions, will appraise major projects, and after ascertaining their economic viability, ensure that credit for both term loans and working capital is provided speedily at higher competitive rates of interest," Singh said. An aggregate additional investment of Rs 50,000 crore will be catalysed over the next three years in infrastructure and manufacturing projects, Singh said.

A consortium of IDBI, IDFC, LIC, ICICI Bank and SBI have been designated for policy, procedural and financial closure of investment, he said.

The government will also provide assistance for setting up the fund, including financial guarantees, appropriate risk mitigation measures, and other financial resources to ensure availability of funds at reasonable rates of interest.

With regard to the fund being set up for providing cheaper credit to small and medium enterprises, Singh said SIDBI will structure a Rs 10,000 crore over the next two years.