The Prime Minister's Office (PMO) has criticised the Foreign Investment Promotion Board's (FIPB) core group for making it mandatory for foreign companies to get a no-objection certificate (NOC) from their local partners for setting up new ventures in India.
In a note to the industry ministry, the PMO said the provision would provide a tool to Indian businessmen for stalling foreign direct investments (FDI).
The PMO note has raised several issues on the NOC conditions.
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l The changed procedure would provide a tool to Indian businessmen to prevent foreign investors from setting up joint ventures or technical collaborations.This will ultimately not be in the interest of consumers.
l It will result in lack of transparency in the policy relating to FDI and technology transfers.
l The objective of encouraging investments in priority areas through automatic approval route will be defeated.
The core group met here yesterday to work out the modalities for the implementation of the `Press Note 18', under which the NOC condition was made mandatory for certain specified categories of foreign collaborations, but deferred a decision on it.
The PMO stand is surprising, considering the `swadeshi' policy of the BJP-led coalition. The views expressed by the PMO are also contrary to the representations made by the apex chambers to the industry minister. The chambers argued that press note 18 is of critical importance to safeguard the interests of shareholders/investors including the financial institutions and workers. The chambers also pointed out that unrestricted permission to foreign investors would result in existing foreign collaboration ventures becoming sick, adversely affecting national interests since in most such cases sizeable investments are locked up from promoters, FIs and banks.
The core group move on NOC issue followed representations from local companies which pointed out that their joint venture collaborations and technical collaborations would be in trouble if their foreign collaborators are allowed to set up new ventures in India for manufacture of same category of products for which the collaborations existed.
The implementation of press note 18, however, became a problem area, following which the core group deciding to relax the conditions by excluding non-exclusive technical collaboration agreements from the ambit of NOC stipulations. In cases of past collaboration agreements which were mutually terminated or lapsed, a six-month cooling off period was proposed before the foreign collaborator could get approvals for new ventures. The core group also proposed the a three-digit NIC classification for defining allied products for deciding the product category.