Revised consolidated guidelines on FDI

 NEW DELHI, April 6, 2013

The HinduA store trader at Banjara Hills in Hyderabad. File photo

Seeking to further simplify the foreign investment regime, government on Saturday came out with the revised consolidated guidelines on FDI.

The guidelines incorporated changes with regard to inflows in multi brand retail and allowing Pakistan nationals and companies to invest in the country.

Besides, it has included policy changes in sectors like single brand retail, asset reconstruction companies (ARCs), power exchanges, civil aviation, broadcasting and non-banking financial companies (NBFCs).

The government made these changes in the sixth edition of the Consolidated FDI Policy Circular, a ready reckoner on foreign investment-related regulations that is effective from April 5.

Last year, amid opposition from some of its key allies and state governments, the Centre permitted 51 per cent FDI in multi-brand retail sector. The government also allowed foreign airlines to pick 49 per cent stake in the cash-strapped domestic carriers.

Similarly, it has raised FDI cap to 74 per cent in various services of the broadcasting sector. The foreign investment ceiling in ARCs has also been increased to 74 per cent from 49 per cent, a move aimed at bringing more foreign expertise in the segment.

It has said that the total shareholding of an individual FII in an ARC shall not exceed 10 per cent of the total paid-up capital.

Further, it has incorporated the changes made with regard to FDI from Pakistan. Now, a Pakistani citizen or an entity can invest in the country under the government approval route.

With regard to issue price of shares, a new paragraph has been added.

Under this, where a non-residents including NRIs are making investments in an Indian firm in compliance with the provisions of the Companies Act, 1956, by way of subscription to its Memorandum of Association, “such investments may be made at face value subject to their eligibility to invest under the FDI scheme“.

The government has permitted foreign investment of up to 49 per cent in the power trading exchanges in the country.

The policy has also listed as many as eight mandatory conditions and one optional clause with regard to conversion of a company with FDI into a Limited Liability Partnerships (LLPs) firm.