Saturday, August 13, 2011

DIPP SETS TOUGH RIDERS IN LIFTING FDI CAPS TILL 49%

The government's plan to remove sectoral FDI caps below 49% would come with a set of riders as it wants to closely scrutinize sensitive sectors like insurance, news media and defence once the liberal regime is in place. The Department of Industrial Policy and promotion (DIPP), which earlier suggested 49% as the lower threshold for FDI cap, now wants to make it mandatory for all joint ventures seeking approval to increase foreign investment to 49% to have Indian citizens as their MD and CEO. Such firms should also have a government-nominated director or their boards. The government will also scrutinize the balance sheets and other company statements to ensure there are no changes in ownership structure or control. In case of JVs in the defence sector, if the FDI is to the extent of 49%, such companies will have to compulsorily go public.

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