Foreign tie-up norms may go gradually

Plan panel drafting policy paper on Press Note 18

The Planning Commission, which is drafting a policy paper on the Press Note 18, is in favour of adopting a middle path on the issue and ensuring that the genuine interests of both domestic investors and foreign collaborators are protected.

The initial draft, to be put up for consideration at the meeting called by the Cabinet Secretariat on Thursday, is likely to suggest a time period, ranging between 4 and 7 years for phasing out the provisions of the Note. This will give the domestic investor time to exit joint ventures.

The paper is also likely to suggest tightening of certain provisions in the Note.

The Note in its present form says, "The automatic route for foreign direct investment (FDI) and/or technology collaboration will not be available to those who have or had any previous joint or allied venture in India."

This provision had been misused in the past and should be modified to specify that the foreign collaborator would not be given automatic approval only if the proposed new joint venture was in the same area as the previous one, said officials.

"The Prime Minister had told us to do a policy paper and we have brought up certain issues for consideration. We have taken into account whatever the relevant ministries had to say and worked out a draft paper which mentions the issues for consideration," said Planning Commission Member Anwarul Hoda.

The meeting on Thursday is expected to be the first in a series of consultations between the ministries of finance, commerce and industry, heavy industry, petroleum and chemicals and fertilisers.

"Inter-ministerial consultations will take time, but policy implications are very clear," he said.

Press Note No 18, issued in December 1998, deals with the guidelines pertaining to approval of foreign or technical collaboration under the automatic route in case of companies with previous ventures or tie-ups in India.