Fin Min raises question on new FDI policy

NEW DELHI: The Finance Ministry has raised questions on the new foreign direct investment rules which have prompted several domestic firms to rework their ownership structure for attracting FDI in areas like retail through backdoor.

The Department of Industrial Policy and Promotion (DIPP), the nodal point for Foreign Direct Investment (FDI) guidelines, is examining the issues raised by the Finance Ministry.

"The Finance Ministry has raised some generic issues... we should be able to answer those questions and address them properly," DIPP Joint Secretary Gopal Krishna told reporters at the sidelines of AMCHAM function here today.

However, Krishna did not specify as to what are the concerns raised by North Block on the new guidelines, perceived to have allowed FDI in multi-brand retail through indirect route. Corporates read these guidelines as to allow FDI or exceed the caps, if downstream companies are created by investment firms.

According to the new guidelines, if an Indian company with foreign equity of less than 50 per cent invests in an another firm, it would not be considered as FDI.

While, the DIPP in a further clarification stated that the sectoral cap would apply even to downstream investments, several domestic firms seem to be ignoring this advice.