Mining FDI caps may be removed

Ventures requiring industrial licence may be exempted from FIPB approval.

The department of industrial policy and promotion (DIPP) has proposed raising the foreign investment cap for all mining sectors to 100 per cent. It also wants to do away with the Foreign Investment Promotion Board's (FIPB) clearance for ventures requiring industrial licences.

As per a proposal sent to various ministries, the FDI cap for mining of diamonds and precious stones is likely to be raised from 74 per cent to 100 per cent.

The norms for mining of coal and lignite are also proposed to be relaxed. For captive mining of the two fuels the cap is proposed to be raised from 74 per cent to 100 per cent.

Present rules permit up to 50 per cent FDI through the automatic route with a rider that foreign investment in PSUs should not exceed 49 per cent.

Officials said the higher FDI limit for coal and lignite would help in attracting foreign investments at a time when the Indian industry was facing an acute shortage of coal.

The measures proposed by the DIPP came after a comprehensive review of the foreign investment policy mandated by Prime Minister Manmohan Singh. Officials said opening up sectors like retail and pensions, and allowing more foreign investment in insurance, were being dealt separately.

By removing FIPB clearance for the six sectors requiring industrial licences would put them onto the automatic route.

At present, licensing is compulsory for six sectors, including electronic aerospace and defence equipment, drugs and pharmaceuticals, hazardous chemicals including hydrocyanic acid and its derivatives, phosgene and its derivatives, distillation and brewing of alcoholic drinks, and cigars and cigarettes.

Foreign investors that want to operate in these sectors first require an industrial licence from the Secretariat for Industrial Assistance before they can go to the FIPB with the licence to seek permission to bring in capital.

Consultants dealing in foreign investment proposals, however, said the move was unlikely to help investors save on time as getting an industrial licence took a long time, while the FIPB clearance was faster and took three to four weeks.

Opening up

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• FDI cap for diamond and precious stone mining, captive mining of coal and lignite to be raised from 74 per cent to 100 per cent
• Ventures requiring industrial licence may be exempted from FIPB approval
• Insurance, retail pension to be dealt with independently