FDI regime set for overhaul in March

Foreign investors to be allowed stakes in commodity exchanges.

The government proposes to make extensive changes in the foreign direct investment (FDI) regime and allow foreign investors to invest in commodity exchanges, raise ceilings on air transport services and retail and amend the clause requiring foreign petroleum companies to disinvest 26 per cent of their Indian subsidiaries in five years.

The proposal would be submitted to the Cabinet this March, a senior official said.

The government is also considering annual reviews of FDI policies in all sectors instead of one sector a month at present.

On FDI in commodity exchanges, the policy change is expected to follow the Securities & Exchange Board of India's last December guidelines on FDI in Indian stock exchanges.

NASDAQ and Goldman Sachs have since picked up a stake in the National Stock Exchange.

There are two interpretations for FDI in commodity exchanges. One is that 100 per cent FDI is permitted through the automatic route and the other that there is a cap which has to be approved by the Foreign Investment Promotion Board.

In banking, the 10 per cent cap on voting rights in subsidiaries of foreign banks is also being reviewed.

There is also a proposal to increase the 49 per cent cap in air transport services, a segment that includes aviation activities like charter flights, ground handling and helicopter services. The government plans to clearly define all aviation activities and the relevant FDI cap.

The government has earlier hinted at increasing the FDI cap in retail, which permits only 51 per cent investment in single-brand retail and 100 per cent in wholesale cash-and-carry.

There have already been announcements of the government's intention to permit FDI in multi-brand retail of sports goods, stationery and electronics.

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WHAT'S ON THE CARDS

Foreign investors to be allowed stakes in commodity exchanges

49% ceiling on air transport services to be raised

51% cap in single-brand retail to be reconsidered

Mandatory clause for petroleum companies to disinvest 26% in Indian subsidiaries in five years to be removed

10% cap on voting in foreign bank subsidiaries to be reviewed