Today's Paper

200 proposals from China wait for security clearance by MHA

New investment policy is aimed at preventing hostile action amid pandemic

About 200 investment proposals from China are awaiting security clearance from the Ministry of Home Affairs (MHA) after new rules were notified in April, making prior government approval mandatory for foreign direct investments (FDI) from countries which share a land border with India.

As FDI is allowed in non-critical sectors through the automatic route, earlier these proposals would have been cleared without the MHA’s nod.

Prior government approval or security clearance from MHA was required for investments in critical sectors such as defence, media, telecommunication, satellites, private security agencies, civil aviation and mining and any investments from Pakistan and Bangladesh.

Revised in April

The Department for Promotion of Industry and Internal Trade (DPIIT) notified the new FDI policy on April 18, which said, “…an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.”

The revised FDI policy, a press statement from DPIIT said, is aimed at “curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.”

A senior government official told The Hindu that since April, after the new rules were notified, the Ministry has received around 200 applications for vetting.

May pull out

“However, none of the proposals have been cleared so far. These agreements would have been in the pipeline for months and it is possible that many might withdraw due to the delay or stringent conditions put in place now,” said the official.

LAC stand-off

India and China have been engaged in a stand-off along the Line of Actual Control (LAC) in eastern Ladakh as there has been a massive build-up of Chinese troops since April-May.

In a first in more than four decades, 20 Indian soldiers were killed on June 15 in violent clashes with the Chinese troops at Galwan Valley. Several rounds of diplomatic and military-level talks have been held as India has demanded that status quo be restored in the border area.

On July 10, Chinese Ambassador Sun Weidong issued a video statement, saying “China has been India’s largest trading partner for many years in a row with cumulative investment in India exceeding $8 billion.”

India shares land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar.

Investors from countries that are not covered by revised FDI new policy only have to inform the Reserve Bank of India after the completion of a transaction rather than seek prior clearance from the administrative ministry.

Recommended for you