The Hindu : Govt. rejects Shell proposal for waiving 26 p.c. divest condition

Online edition of India's National Newspaper
Friday, Nov 15, 2002

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Business

Govt. rejects Shell proposal for waiving 26 p.c. divest condition

NEW DELHI NOV. 14. The Government has rejected yet another proposal, this time by Shell India, seeking waiver of the mandatory divestment clause of 26 per cent in favour of Indian investors, saying it was against the policy to delete entry level conditions.

Coca-Cola India had earlier lobbied aggressively for waiver of a similar divestment condition within five years from the date of approval but the Government rejected this case too on similar grounds.

In its meeting held on October 3, the Foreign Investment Promotion Board recommended rejection of Shell India's proposal for waiver of divesting 26 per cent equity in the country.

"The condition of divestment of 26 per cent equity was imposed as an entry level condition. The board noted that as a policy, deletion of entry-level conditions is not agreed to,'' sources said here today.

Shell India had sought a clarification on whether 100 per cent foreign direct investment without any requirement to divest 26 per cent of the stake to resident Indians was permissible under sectoral guidelines for products under the Ministry of Chemicals and Fertilizers.

In the meeting, the Secretariat of Industrial Assistance pointed out that the request was for deletion of the divestment condition on the ground that the company (Shell) only intends trading in chemicals and petrochemical products and not petroleum products.

Shell said in its application that the current sectoral policy for trading in petrochemicals permits establishment of a 100 per cent subsidiary for trading ex-bond, without any requirement to divest 26 per cent equity within five years from the date of approval.

The company wants to trade in isopropyl alcohol, methyl ethyl ketone, methyl isobutyl ketone, acetone dimethyl ketone, methyl proxitol acetate and mixed xylenes.

In its application, Shell said, "the company proposed to undertake trading in chemicals and petrochemicals now and is eager to bring in additional funds required for the purpose,'' but did not specify the investment it plans to infuse in India.

PTI

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