In view of the continued demand by foreign investors seeking clarifications on various aspects of the foreign direct investment (FDI) policy in various sectors in the recent past, Union Commerce and Industry Minister, Anand Sharma on Thursday said government will come out with a new set of clarifications on the FDI policy which would come into effect prospectively.
Talking to reporters after his meeting with Finance Minister, P. Chidambaram here, Mr. Sharma said the government proposed to issue some clarifications on FDI policy. ``Whatever clarifications will be issued in this process will be prospective,’’ he added.
The meeting between Mr. Chidambaram and Mr. Sharma comes in view of the committee formed by the Finance Ministry to re-look into the various aspects of the FDI policy and also review the FDI caps in various sectors. At present, two committees, one under Department of Economic Affairs, Secretary Arvind Mayaram and the other constituted by the Reserve Bank of India (RBI), are examining different aspects of the FDI regime.
Both the Ministers are learnt to have discussed the issue of redefining FDI and foreign institutional investment (FII) to remove ambiguities. According to sources, the Department of Industrial Policy and Promotion (DIPP) would soon issue clarifications on FDI in multi-brand retail sector. For instance, in multi-brand retailing sector, several big retail players have raised questions like what constitutes back-end infrastructure. A clarification on this aspect would be issued by DIPP shortly in order to pave the way for further investments in this sector by international retail giants.
On a question on whether the Commerce and Industry Ministry and the Finance Ministry have differences on defining the word `control,’ Mr. Sharma ruled out any differences and said there is complete agreement and understanding between the Ministries. The Securities and Exchange Board of India (SEBI) takeover code and the proposed Companies Bill define control as the right to appoint majority of directors as well as to control management and policy decisions including via shareholder agreements. The FDI policy defines control only as the right to appoint majority of directors.
Due to this, there have been differences over the definition. Clarity on the matter would help foreign investors make downstream investments even in sectors where there are FDI caps.