The Government has notified changes in the Foreign Direct Investment policy, which was cleared by the Cabinet early this month. The amendments include increased sectoral investment limit in the telecom sector, easing of conditions for multi-brand retail and a tighter definition of ‘control’ of a company.
On Thursday, the Department of Industrial Policy and Promotion put up three Press Notes — one amending the policy on FDI in multi-brand retail trade, the second redefining the term ‘control’ for calculating FDI in a sector and the third reviewing the policy on FDI caps and routes in various sectors.
Although the Press Notes state that the provisions notified are immediately effective, the Government will have to amend the Foreign Exchange Management Act to bring it in line with the changes in the multi-brand retail FDI provisions and the definition of control.
The amendments in the FDI policy allow foreign investors in multi-brand retail to keep sourcing from their small scale suppliers (with total investments in plant and machinery up to $2 million) to fulfil the 30 per cent mandatory small scale sourcing condition even after these grow in size.
Moreover, foreign retailers have also been exempted from investing in back-end infrastructure beyond the first tranche of investments brought in and can now open up stores in all cities irrespective of size if State governments permit.
The DIPP also notified the Cabinet’s decision to increase FDI cap in the telecom and asset reconstruction sectors to 100 per cent and credit information companies to 74 per cent and ease approval procedures for nine sectors including petroleum, courier services and power exchanges.
The revised definition of control states ‘control should include the right to appoint a majority of directors or to control the management or policy decisions including by virtue of their shareholding or management or shareholders agreements or voting agreements’.