Automatic nod for FDI widened

Elaborating on the enhanced automatic route, Prasad said in the event of projects having undergone appraisal by a financial institution, additional clearance by the Foreign Investment Promotion Board (FIPB) will not be necessary. The FI in its appraisal will look at the cost payment schedule which will obviate the need for any further technology import clearance, he said.

Companies whichhave not undergone FI appraisal but have a three to five year profit and dividend record will also be allowed to sail through the automatic route, Prasad said. For PSUs which venture into joint ventures no further assessment will be required for import of technology, he added.

“We are now entering the last decimal point of liberalisation where only six areas remain under industry licensing,” he said. In such a regime the FIPB will wither away, he added. The role of the FIPB will have to undergo a change in the future, as joint ventures undergo changes in equity the FIPB will study these developments and clear them, the secretary said.

Prasad said the government has also decided to set up a statutory regulatory body for the petroleum sector and an umbrella legislation to reduce the nuisance level of various inspectors that factories have to suffer. There is a new regulatory statutory authority on the anvil for the petroleum sector where mega projects have to appraised and cleared. This agency will lookinto the risk-return questions and decide on issues of investor and customer interest, Prasad announced.

The umbrella legislation is envisaged to reduce the level of inspector interference. Two committees will be formed at the state level, one under the chief secretary and the other under a district collector which will have “overriding authority” over the several state statutes. Currently nearly 30 inspectors visit a factory in a month, under the new law their arbitrariness will be streamlined. “It will be possible to ensure that all inspectors visit the factory on one day, so that managerial concentration is not dissipated,” Prasad said.

FDI inflow during the January to August period was Rs 7,245 crore compared to a figure of Rs 8,398 crore for the same period in 1997. But there are some large proposals with the Cabinet Committee on Foreign Investment which when sanctioned will show a higher FDI level than ’97, Prasad said. Fiat has a proposal to bring in $ 1 billion.

About 22 per cent ofsanctions translate into actual investments, the secretary said when asked about the actual inflow. The sanctioned amount does not always translate into investment as a large number of companies take contingency approvals, Prasad said. A large number of telecom companies had taken investment approvals in the hope that they would get licenses, these sanctions did not translate into investment.

Prasad is of the view that industrial recovery is underway and industrial production will touch a level of 7 to 8 per cent in the current year. he cited a ICICI study, according to which both the sales turnover and the level of net profit for 434 companies which account for 40 per cent of market capitalisation is up. Sales is up by 12.3 per cent and net profit is up by 24.2 per cent. Prasad said this was heartening as profit is improving by cost cutting measures.