WTO flares up on 26% FDI cap in PSU refineries
WTO has sought an explanation from New Delhi asking why it has restricted foreign equity in JV refineries with PSUs at 26% when 100% FDI is allowed in all activities in oil & gas sector, including exploration, production and marketing.
By Rajeev Jayaswal, TNN |
NEW DELHI: WTO has raised the issue of restricting foreign equity in joint venture refineries with PSUs to 26% at a time when 100% FDI is allowed in private refineries.
The matter has come up even as the government is working on relaxing FDI norms for JV refineries. One such case currently awaiting FIPB nod is the JV refinery of LN Mittal’s Mittal Investments and HPCL at Bathinda. Sources in government said while petroleum ministry has asked for allowing Mittal to pick up 49% stake in the HPCL-promoted Bhatinda refinery as a standalone case, the finance ministry is against relaxing rules for an individual instance.
“Finance ministry is in favour of increasing FDI cap from 26% to 49% and supporting a change in policy, instead of making an exception for the Mittal group,” a source said. Though 100% FDI under automatic route is allowed in the petroleum refining sector, the current policy does not allow foreign investment to exceed 26% in case of a PSU refinery.
Officials said the government has also received questions from WTO seeking justification for having a discriminatory policy. The query from the trade body said: “Could India please inform us of the rationale for differentiating refining from other activities in oil & gas sector?” The trade body sought an explanation in light of the fact that 100% FDI is allowed in all activities in oil & gas sector, including exploration, production and marketing.
WTO has also asked whether India is planning to relax the restriction. “If so, details of the anticipated timing would be appreciated,” it said while reacting to New Delhi’s response to ‘WTO Trade Policy Review of India’.
The petroleum ministry has begun the process of relaxing FDI cap to allow the Mittal group to pick up 49% stake in HPCL’s Rs 17,973-crore Bhatinda refinery. The proposal will, however, be considered by the Cabinet Committee on Economic Affairs (CCEA) for a special clearance.
According to sources, petroleum ministry has argued that Mittal Investments should be allowed to hold 49% in the refinery JV since it will be the first and the single largest FDI in the refining sector.
While the PSU oil company and Mittal Investments would hold 49% each in the project, the remaining 2% is to be placed with financial institutions. The paid-up equity of the Guru Gobind Singh Refinery, a 100% subsidiary of HPCL, is Rs 332 crore.
The matter has come up even as the government is working on relaxing FDI norms for JV refineries. One such case currently awaiting FIPB nod is the JV refinery of LN Mittal’s Mittal Investments and HPCL at Bathinda. Sources in government said while petroleum ministry has asked for allowing Mittal to pick up 49% stake in the HPCL-promoted Bhatinda refinery as a standalone case, the finance ministry is against relaxing rules for an individual instance.
“Finance ministry is in favour of increasing FDI cap from 26% to 49% and supporting a change in policy, instead of making an exception for the Mittal group,” a source said. Though 100% FDI under automatic route is allowed in the petroleum refining sector, the current policy does not allow foreign investment to exceed 26% in case of a PSU refinery.
Officials said the government has also received questions from WTO seeking justification for having a discriminatory policy. The query from the trade body said: “Could India please inform us of the rationale for differentiating refining from other activities in oil & gas sector?” The trade body sought an explanation in light of the fact that 100% FDI is allowed in all activities in oil & gas sector, including exploration, production and marketing.
WTO has also asked whether India is planning to relax the restriction. “If so, details of the anticipated timing would be appreciated,” it said while reacting to New Delhi’s response to ‘WTO Trade Policy Review of India’.
The petroleum ministry has begun the process of relaxing FDI cap to allow the Mittal group to pick up 49% stake in HPCL’s Rs 17,973-crore Bhatinda refinery. The proposal will, however, be considered by the Cabinet Committee on Economic Affairs (CCEA) for a special clearance.
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According to sources, petroleum ministry has argued that Mittal Investments should be allowed to hold 49% in the refinery JV since it will be the first and the single largest FDI in the refining sector.
While the PSU oil company and Mittal Investments would hold 49% each in the project, the remaining 2% is to be placed with financial institutions. The paid-up equity of the Guru Gobind Singh Refinery, a 100% subsidiary of HPCL, is Rs 332 crore.
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