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Govt issues revised FDI norms for six sectors

New Delhi, Thu, 13 Mar 2008 NI Wire

Government on Wednesday issued the revised guidelines with making big changes on Foreign Direct Investment (FDI) that had been approved by the Union Cabinet on January 30. However, government has not made a clarification on the proposal of not detaching the FDI provisions from investments in real estate sector.

The government has also not make clearance over the issue of relaxing the compulsory three-year lock-in period for Foreign Institutional Investors (FII) in real estate sector whereas it was green signaled by Department of Industrial Policy & Promotion and later central Cabinet.

Financial experts are assuming that government fears of possible greater capital inflow in case of making change in FDI norms in real estate sector. The step to delink the FDI provision from investments by FII in real estate (under the portfolio investment scheme) might lead to greater stock market play in real estate scrips. Government has also rejected the proposal of permitting FII in pre-IPO placements of Indian realty companies.

This might be proved as a bad news for real estate companies, which were hoping to get investment flow through this route.

The Department of Industrial Policy and Promotion (DIPP) has issued six press notes as six norms, given below.

- Guidelines to allow 49% FDI in credit information companies, and taking out credit reference agencies from the list of the Non-Banking Financial Company activities where FDI is allowed 49%.
- Guidelines to allow FDI up to 26 % and FII up to 23 % in commodity exchanges while no single investor can hold more than 5 per cent stack.
- Guidelines to allow FDI up to 100% for establishing industrial parks under the automatic route and that Industrial Parks should comprise a minimum of 10 units with no single unit occupying more than 50 per cent of the allocated area.
- Guidelines to allow 74 % FDI ceiling in civil aviation sector including non-scheduled airlines, chartered airlines and cargo airlines while 100 per cent FDI in maintenance and repair organisations, flying training institutes, technical training institutions, and helicopter services/seaplane services. However no foreign airline would be allowed to pick up equity, even indirectly, in air transport services that will be defined for the first time.
- To rationalisation of the FDI policy in the petroleum and natural gas sector; guidelines to waive off 26% divestment in the petroleum market and to hikes 49% FDI ceiling in PSU refineries.
- Guidelines to allow up to 100% FDI in mining and mineral separation of titanium-bearing minerals and ores (prior government approval would be necessary), its value addition, and integrated activities. No FDI is permitted in atomic minerals.

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June 12, 2008 at 12:00 AM

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