FIPB sounds warning on courier FDI

Gunjan Pradhan Sinha and G Ganapathy Subramaniam

NEW DELHI: As the government plans to curb foreign direct investment (FDI) in courier service through amendments to the Indian Post Office Act of 1898, foreign investors are being informed that their clearances would be subject to the modifications in rules, which are in the pipeline. While 100% FDI is currently allowed in courier services, the government is looking at imposing a 49% ceiling . The Department of Posts has been pressing for changes in the FDI policy on courier service, but the government has not taken any final decision till now.

In the interim, investors seeking to invest in courier service companies are being warned that they might face policy changes. The issue came up before the Foreign Investment Promotion Board (FIPB) recently and a Singapore-based company, DPEX Ventures, was informed that the investment approval being granted to it would be subject to changes in the policy.

The warning to foreign investors would indemnify the government if it faces challenges when changes are made in FDI norms, officials feel. However, it is not clear if the same protection would be available in the case of companies which received approvals in the past without such a warning.

Global giants like DHL and Fedex now run 100% subsidiaries in India, but they may have to reduce their holding if the guidelines proposed by the Department of Posts are accepted by the government.