The Government’s third pro-reforms package in this non-Budget poll year is all set to be unveiled tomorrow: a hike in the ceiling on foreign direct investment in banking, petroleum, telecom and information sectors. However, the sectoral cap for FDI in airline companies has been kept out to be included in the Civil Aviation Policy to be announced later this month. Three of the four separate proposals, which come up for approval by the Cabinet Committee of Economic Affairs tomorrow, were cleared by a Group of Ministers last February. When it was first drafted by N K Singh in August 2002, it had irked the swadeshi lobby, particularly the Swadeshi Jagaran Manch which felt that the recommendations meant handing over Indian economy to foreigners. Most prominent among the proposals is the increase in FDI limit in domestic private banks to 74 percent from current 49 percent to encouarge setting up of subsidiaries by foreign banks and attract investment in private banks without impacting ownership, control and regulation of state-run banks. In petro-products retailing, specially transport fuels, the limit is proposed to be raised from the existing 74 percent to 100 percent, provided the firms invest Rs 2000 crore in oil infrastructure. The proposals need not go to the Foreign Investment Promotion Board (FIPB) for approval. The FDI limit for petro-product pipelines would be increased to 100 percent from current 51 percent. But for natural gas pipelines, the approvals for 100 percent foreign investment would be routed through the FIPB. Hundred percent equity would also be permissible in oil exploration but under the umbrella of the New Exploration Licensing Policy (NELP). Joint ventures by public sector undertakings in setting up oil refineries would no longer be limited by the 26 per cent FDI. The PSUs would have the freedom to decide the exact level of FDI. In basic and mobile telecom, foreign firms would be allowed to own 74 percent as against the present 49 percent. The foreign partner could hold the management control provided it receives security clearances specified by the Telecom Ministry. FDI in publishing non-news scientific and technical journals would also be raised to 100 percent from 74 per cent but each proposal would have to be cleared by FIPB. Internet service providers without gateways, e-mail and voice mail service providers would now be 100 per cent under the automatic route with the rider that the foreign firm, if listed in its home country, will have to divest 26 per cent stake in the company within five years. Earlier, FDI beyond 49 percent had to be approved by the FIPB.
