Investment cap for commodity bourses on the anvil

A proposal will soon be taken up by the Cabinet for setting the foreign investment cap in commodity exchanges and public sector oil refineries at 49 per cent.

"The Department of Industrial Promotion and Policy (DIPP) is preparing a note in this regard which will soon be sent to the Cabinet for clearance," official sources said.

The note is likely to peg the foreign investment cap in commodity exchanges at 49 per cent, with a limit of 26 per cent on foreign direct investment (FDI) and of 23 per cent on foreign institutional investment, similar to the ceiling in stock exchanges, the sources said. No individual investor, however, would be allowed to hold more than 5 per cent.

Sources said those foreign investors that already have more than 5 per cent in commodity exchanges would be given time to bring down their stake to 5 per cent. In July last year, Goldman Sachs picked up 7 per cent in National Commodities and Derivatives Exchange for $23.1 million from ICICI Bank. Early last year, Fidelity picked up 9 per cent in Multi Commodity Exchange.

For oil refineries, the petroleum ministry has already moved the Cabinet to allow 49 per cent FDI in state-run Hindustan Petroleum's Bhatinda refinery, in which steel tycoon LN Mittal plans to buy a stake.

Sources said the two notes by the DIPP and petroleum ministry could be merged to seek the Cabinet's overall permission for raising the FDI limit in public sector oil refineries, so that Mittal's proposal could be cleared.

The Foreign Investment Promotion Board had recently refused to consider Mittal's plan, saying the present policy restricts FDI in public sector refineries to 26 per cent and recommended that the proposal should not be taken up as a stand-alone case.