Revised FDI ceilings for six sectors notified

More than a month after the Cabinet cleared the foreign direct investment (FDI) review proposal easing FDI norms in various sectors, the government on Wednesday notified the revised ceilings of foreign investment in six sectors. However, there is no mention in the norms of the proposal to relax the mandatory three-year lock-in period for foreign institutional investors in real estate as stated in the announcement made by the department of industrial policy & promotion following Cabinet clearance. According to sources, the finance ministry has rejected the proposal to allow foreign institutional investment in pre-IPO placements of Indian realty companies. This will mar the hopes of real estate companies eyeing funds through this route, as they are already hemmed in by rising home loan rates, and curbs on external commercial borrowing and issuing of convertible preferential shares. The notification contains liberalised FDI norms for six sectors. Apart from allowing 74% FDI in charters and cargo services, the government has allowed 100% FDI in helicopters, flight training institutes, ground handling and technical training through the automatic route. However, the eased guidelines have come with a rider. No foreign airline will be allowed to pick up equity, even indirectly, in air transport services, which will be defined for the first time. The second press note in 2008 waives the 26% divestment clause in the petroleum market and hikes FDI ceiling in PSU refineries to 49%. The third allows 49% foreign investment in commodity exchanges. Here, a single foreign investor cannot own more than 5%. The fourth press note deals with clearance of 49% FDI in credit information companies and scrapping of credit reference agencies from the list of non-banking finance company activities permitted for FDI. Press note 5 of 2008 allows 100% FDI in titanium mining, apart from specifying that no FDI is permitted in atomic minerals. The conditions for 100% FDI in industrial parts have been laid down through press note 6. Review of the FDI policy faced roadblocks since the beginning of 2007 due to strong opposition, especially from the Left, against allowing FDI in retail. The government had to finally exclude the sector from the review. Similarly, the move to hike FDI ceiling in insurance has also been kept on hold.