Cabinet okays easing FDI rules for telecom,defence,retail

The Cabinet on Thursday raised the cap on foreign direct investment in the telecom and defence sectors

The Cabinet on Thursday raised the cap on foreign direct investment in the telecom and defence sectors and relaxed investment conditions for multi-brand retail companies.

The move came a day after finance minister P Chidambaram said that the government was working on several decisions,including a significant liberalisation of FDI limits,to take on the challenge posed by the current account deficit.

Thursdays decisions formalise the announcements made on July 16 after Prime Minister Manmohan Singhs meeting with senior Cabinet ministers. The decisions include allowing 100 per cent FDI in the telecom sector and FDI beyond the existing 26 per cent in the defence sector on a case-by-case basis.

In multi-brand retail,the Cabinet has allowed companies to set up outlets in cities even if their population is below 10 lakh as per the 2011 census. This move was first reported by The Indian

Express on July 25. Under the earlier proposal,foreign retailers could open outlets only in cities with a population of 10 lakh and more.

Besides,sourcing and mandatory back-end infrastructure rules have also been relaxed. Foreign investors will now be able to continue sourcing from the same small and medium enterprises even when the suppliers turnover exceeds 1 million. The limit has been doubled to 2 million.

The government has also relaxed the back-end investment rule. Foreign investors now need to invest only 50 million from the first tranche of their investment in setting up back-end infrastructure and not during subsequent investments.

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The clearance to raise the FDI cap in insurance indicates the government has made up its mind to bring the insurance bill to raise the limit to 49 per cent in Parliaments monsoon session beginning Monday.

The Cabinet Committee on Economic Affairs CCEA,meanwhile,has cleared the new definition of control in the FDI policy.

The definition will also settle the issue of FDI cap over the total foreign investment,that is,direct and indirect,in Indian companies.

According to the new definition proposed by the department of industrial policy and promotion DIPP,control will include the right to appoint a majority of the directors to control the management or policy decision,including by virtue of the shareholding or management right or shareholders agreement or voting rights.

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The new definition is subjective in nature8230; It is the a big concern as subjectivity may lead to delays and more scrutiny, said Punit Shah,executive director,KPMG.

clears 10 IOC stake sale

New Delhi: The Cabinet on Thursday cleared the proposal for sale of 10 per cent government stake in Indian Oil Corporation IOC,which may fetch around Rs 3,750 crore to the exchequer at the current market price. PTI