The Hindu : Planning Commission report for 100 p.c. FDI in oil sector

Online edition of India's National Newspaper
Saturday, Sep 07, 2002

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Planning Commission report for 100 p.c. FDI in oil sector

By Our Special Correspondent

NEW DELHI SEPT. 6. Amid the raging controversy over the public sector disinvestment policy, the Planning Commission today gave a controversial report on foreign investment. It contains recommendation such as raising the limit of such investment in the insurance sector to 49 per cent, in banking and financial services to 100 per cent and cent per cent foreign direct investment (FDI) in areas such as oil refineries, oil marketing, petroleum exploration and airports.

This potentially controversial report was presented by the Deputy Chairman of the Planning Commission, K.C. Pant, and the Chairman of the steering committee, N.K. Singh, to the Prime Minister, Atal Behari Vajpayee, who promptly sent it to the Group of Ministers (GoM) on Foreign Investment for consideration. He has promised an early processing of the recommendations.

The N.K. Singh Committee was asked to draw the roadmap for the foreign investment policy for the Tenth Five-Year Plan so as to target $ 8 billion annually. Its major recommendations include lifting sectoral caps in insurance from the present 26 per cent to 49 per cent, in oil refinery from 26 to 100 per cent, in oil marketing from 74 per cent to 100 per cent, in civil aviation from 40 to 49 per cent including permission to foreign airlines, basic and mobile telephony from 49 to 74 per cent and real estate from zero to 100 per cent. The committee, however, made no recommendations on lifting the foreign investment limit in the print media from the existing 26 per cent or in the case of retail trade.

The committee also recommended that the entry route should be made automatic with the exception of a few sectors in which limits remain. It suggested doing away with the current barriers relating to exit conditions, such as the bar on sale of shares by a foreigner to another foreigner, sale from non-resident to resident and other conditions on share value.

The committee recommended a Foreign Investment Promotion Law which would take away the present governance of foreign investment by the Foreign Exchange Management Act (FEMA) and earlier by the Foreign Exchange Regulation Act (FERA).

Both FERA and FEMA were regulatory laws and not a promotional law and hence it was felt that in the present circumstances, these should be replaced by a new Foreign Investment Promotion Law.

Other recommendations pertain to setting sectoral targets for attracting foreign investment instead of the overall target at present; the promotion of special economic zones as the most favoured destination for export-related foreign investment by reducing red-tape to the levels existing in China and setting up an Investment Facilitation Fund to help those States which need assistance in modifying policies and procedures for promoting foreign investment.

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