Government further liberalizes Foreign Direct Investment Policy

The Union Cabinet on 30th January 2008 reviewed and approved the FDI policy for further liberalization as follows:

I Civil Aviation:

(i) To continue with the existing FDI cap at 49% on the automatic route and 100% for NRI, subject to no direct or indirect participation by foreign airlines and reclassifying it as Domestic Scheduled Passenger Airline Sector.

(ii) To allow FDI up to 74% on the automatic route for Non Scheduled airlines; Chartered airlines; and Cargo airlines with no direct or indirect participation by foreign airlines in non-scheduled airlines and chartered airlines. NRI investment would be allowed up to 100% on the automatic route

(iii) To allow FDI up to 74% on the automatic route for Ground Handling Services subject to sectoral regulations and security clearance. NRI investment would be allowed up to 100% on the automatic route.

(iv) To allow FDI up to 100% on the automatic route for Maintenance and repair organizations; flying training institutes; technical training institutions; and helicopter services / seaplane services in the aviation sector requiring DGCA approval.

II Petroleum & Natural Gas:

(i) to delete the condition of compulsory divestment of up to 26% equity in favour of Indian partner (s) / public within 5 years for actual trading and marketing of petroleum products.

(ii) To increase the equity cap from 26% to 49% with prior approval of FIPB in petroleum refining by PSUs. However, it does not envisage or contemplate disinvestment or dilution in the existing PSUs.

III Commodity Exchanges:

(a) To allow FDI upto 26% and FII upto 23% in Commodity Exchanges and subject to no single investor holding more than 5%.

IV Credit Information companies:

(i) To allow foreign investment up to 49% with prior government approval in Credit Information Companies subject to following conditions:

(a) FDI up to 49% will be allowed with specific approval of the Government and regulatory clearance from RBI

(b) FII investment will be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment.

(ii) To delete ‘Credit Reference Agencies’ from the list of Non Banking Finance Companies (NBFC) activities permitted for FDI up to 100% on the automatic route.

V. FDI in Mining of Titanium bearing minerals and ores and its value addition:

(i) To allow FDI up to 100% with prior Government approval in Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities subject to the sectoral regulations (including Mines and Minerals (Development & Regulartions) Act 1957) and the following conditions for mineral separation:

(a) FDI up to 100% shall be allowed for mineral separation only if value addition facilities are set up within India alongwith transfer of technology;

(b) Disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection ) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.

VI Industrial Parks :

Clarifications will be issued that provisions of Press Note 2(2005) would not apply to Industrial Parks.

VII Applicability of conditions for FDI in construction development projects as per Press Note 2(2005) for registered FIIs:

To issue a clarification to the effect that investments by registered FIIs under the Portfolio Investment Scheme, would be distinct from FDI and as such would be outside the purview of conditionalities specified in Press Note 2(2005).

The approval would help in higher FDI inflows through liberalization of the FDI policy and reduction of levels of approvals, which are no longer worthwhile.



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