Cabinet clears FEMA

Briefing newspersons about the deliberations of the Cabinet meeting, an official spokesman said at present, the facility of convertibility on current account is already there.

Even on capital account, certain transactions are permitted by the government and the Reserve Bank through special orders.

The proposed bill, he said, does not alter the position substantially. However, it will have features for regulating and liberalising the regime pertaining to capital account transactions.

It will have provision for dealing with offences of violations and penalties, he said adding that certain specified offences would be investigated by the Enforcement Directorate.

The bill, he said, is part of the process for gradually pursuing capital account convertibility of the rupee.

The spokesperson clarified that FERA violations, until and unless it is replaced by the new law, would continue to be dealt with under the existing act as the provisions of the new law will take effect prospectively.

The clarification should set at rest speculations in certain quarters that the proposed bill might provide immunity to those currently facing charges for violating the act.

When asked about the other twin legislation regarding money laundering, the spokesman said this did not come up before the cabinet today for discussion.The government had originally intended to bring forward both the legislations on FEMA and money laundering in the monsoon session of Parliament but could not do so.

The spokesman said that Chidambaram had stated in his budget speech that `as we go towards a more open economy with greater investment linkages with the rest of the world, the regulation governing the foreign exchange regulations also need to be modernised’.

The Reserve Bank of India appointed a committee of experts to draft the new Bill in pursuance of the Finance minister’s proposal. The committee prepared broad features of the Bill, which were discussed at the cabinet meeting.At today’s meeting, the civil supplies ministry also made presentations about improvements in the targetted public distribution system (PDS).

It may be recalled that the United Front Steering Committee has constituted a six-member committee to suggest changes to make it more advantageous to those living below the poverty line.