Friday, 14 September 2012

Govt allows FDI in aviation, multi-brand retail

Govt allows FDI in aviation, multi-brand retail
Clean Media Correspondent

New Delhi, Sept 14 (CMC) Opting for big-bang reforms, the government on Friday allowed 51% FDI in multi-brand retail, 49% investment by foreign airlines in aviation sector and sale of equity in four PSUs.
Battling perceptions of policy paralysis, the government announced the surprise decisions after meetings of the Union Cabinet as well as the Cabinet Committee on Economic Affairs (CCEA), prompting angry reactions from its key ally Trinamool Congress as well as BJP and Left parties.
The slew of reforms decided upon include raising FDI cap in broadcasting from 49% to 74% and allowing foreign investment in power exchanges.

The UPA government had first made an attempt to introduce FDI in multi-brand in November last year but kept the decision in abeyance following stiff opposition from TMC, Samajwadi Party as well as opposition parties.
It has now decided to take the plunge within days of the conclusion of recent session of Parliament which was disrupted over coal scam.
The decisions come on top of Thursday's hike in diesel prices and capping of supply of subsidised LPG to cut oil subsidises which has already invited protests from allies and opposition.

"Let us not confuse consensus with unanimity. For unanimity we will have to wait in eternity. This (today's decision) has consensus," Commerce minister Anand Sharma told a press conference in New Delhi clearly conveying the message that the Centre has decided to go ahead with the reforms despite opposition.

Sharma said they respected West Bengal Chief Minister Mamata Banerjee's position on multi-brand retailing. "It is her prerogative to implement or not. It is equally our prerogative to implement in the other states (which are keen on it)".

The Cabinet also diluted local sourcing norms for 100% foreign direct investment (FDI) in single brand retail by dropping the provision of 30% compulsory sourcing from small and medium enterprises (SMEs).

For multi-brand retailing, a minimum investment of USD 100 million has been fixed, half of which necessarily has to be in creating storage and warehousing facilities in rural areas.

Front end retail stores would be allowed to be set up only in cities with a minimum of one million population. However, this norm has been diluted for hilly states which have been authorised to decide on criteria for choosing big cities.

While the government had previously permitted 49% in aviation sector, the Cabinet today allowed foreign carriers to investment in domestic airlines. The move would help cash-strapped carriers like Kingfisher and SpiceJet to bring in strategic partners

Permission has now been granted to foreign airlines to invest under the government approval route in Indian carriers operating scheduled and non-scheduled transport services.

A scheduled operator's permit can be granted only to a company that is registered and has its principal place of business in India with its Chairman and at least two-third of directors who are Indians.

Substantial ownership and effective control should be vested with Indian nationals.

The companies which will divest their equities are Hindustan Copper Ltd (9.59%), Nalco (12.15%), Oil India Ltd (10%) and MMTC (9%). The sale of shares is likely to fetch in about Rs. 15,000 crore, half of the budgetary disinvestment target set for the current fiscal year.

Another major decision covers the broadcasting sector by enhancing foreign investment that is expected to expand the reach of broadcasting services.

Under this decision, teleports, DTH and cable network services can attract foreign investment up to 74% over the present limit of 49%, which will be through the automatic route. Beyond 49% would come through the government route.

At present, there is no specific dispensation under FDI for mobile TV. It has now been decided to permit FDI up top 74%.

However, the existing limit of 74% foreign investment in the Headend-in-the Sky Broadcasting Service would continue.

The CCEA also decided to permit foreign investment up to 49% (FDI 26% and FII 23%) in power trading exchanges.

FII investment would be permitted under the automatic route and FDI under the government approval route.

Replying to questions, Sharma said the 10-month period between November last year when the government decided to first allow FDI multi-brand retailing was used for extensive consultations with all stakeholders.

"There was never a decision to rollback the decision. It was only suspended because of reservations from some states. This is an enabling step. States which want to implement are free to implement, those who do not want need not," he said.

Dismissing the charge of policy paralysis which he said was a media creation, he said the government did take decisions after consultations in the interest of people.

While acknowledging that opposition from Left parties was due to their ideological blinkers, he accused the BJP of practising partisan politics to oppose the decisions.

In fact when they were in power, BJP-led NDA had prepared a Cabinet note for allowing 100% FDI in multi-brand retailing without any conditions, he said.

He said the Department of Industrial Policy and Promotion would come out with notifications detailing rules for all the decisions without any delay.

Eights states including Delhi, Jammu and Kashmir, Assam, Maharashtra, Rajasthan, Uttrakhand, Haryana and Manipur have supported FDI in multi-brand retailing while Bihar, Karnataka, Kerala, Madhya Pradesh, Tripura and Odisha have expressed reservations.

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