Govt may review FDI norms next month

Foreign investment caps in sensitive sectors like aviation, petroleum and retail could undergo changes next month when the government reviews the norms on foreign direct investment (FDI).

The annual review, which normally follows the Budget presentation, has been delayed this time as inputs from the ministries have not yet been received.

"The process of consultation between various ministries on FDI is in progress, and is expected to be completed soon. The changes in FDI regime after the review would be announced early next month," a source said.

According to reports, the government is likely to allow foreign investors to pick stake in commodity exchanges and change norms and caps for aviation, petroleum and retail.

However, in view of the political opposition, especially in the retail sector, the government is extra-cautious.

In the review, the government may liberalise FDI norms in asset reconstruction companies where the limit currently stands at 49% subject to approval by the Foreign Investment Promotion Board. In the banking sector, the cap on voting rights is also likely to be reviewed.

In petroleum, the dilution of condition that 26% of the equity must be divested in favour of Indian entities in five years could be a part of the changes.

In aviation, the proposal is to set a separate head of air traffic services. The government will define what constitutes these services and whether they should have different FDI rules and limits. At present, every aviation activity, apart from airports and airlines, falls in this category and includes areas like charter and helicopter services and ground handling.