GoM okays lifting of sectoral caps on FDI

NEW DELHI: Ahead of the Budget, the Group of Ministers on Thursday recommended enhancing the ceiling on foreign direct investment in major sectors like petroleum, civil aviation, telecom and non-news print media.
The group, headed by Finance Minister Jaswant Singh, decided to allow 100 per cent FDI in oil refineries and physical infrastructure in airports and 49 per cent FDI in airlines.
The recommendations, which would now go before the Cabinet for approval, also suggested 100 per cent FDI in the non-news scientific and technical journals and enhancing the ceiling to 74 per cent in the telecom sector from 49 per cent at present.
The first meeting of the GoM - which is looking into the report of Steering Committee under Planning Commission, headed by NK Singh - took up only the issue of lifting or enhancing the investment caps in select sectors.
The GoM did not take up enhancing FDI caps in banking, insurance, NBFC and the SSI sectors.
In case of petro refining, the GoM lifted the 26 per cent FDI cap on PSU refinery companies to make it on par with private refiners where 100 per cent is already allowed.
The hike in FDI in PSU petro-refiners would be left to the judgement of the respective companies, sources said.
In the oil marketing sector, the present cap of 74 per cent has been enhanced to 100 per cent through the automatic route subject to necessary authorisation of the government.
The existing conditions like Rs 2,000-crore investment in oil infrastructure would continue.
In case of pipeline projects for transporting petro products, the GoM suggested increasing the cap to 100 per cent from the present 51 per cent. However, pipelines for natural gas and LNG transportation would continue to be regulated by the FIPB as government is yet to come up with a guideline.
In airport sector, the GoM recommendations to allow 100 per cent FDI was only in the physical infrastructure (city side) but air-traffic continues to be totally under the control of Airport Authority of India for security reasons.
FDI cap on airline has also been proposed to be raised to 49 per cent from 40 per cent but it would require FIPB permission and subject to security clearances, sources said adding foreign airliners can be allowed to hold the entire 49 per cent.
In the case of basic and mobile telecom sectors, foreign players would be allowed to own 74 per cent directly as against the present norm of 49 per cent.
Foreign telecom companies can hold another 24.99 per cent through an investment company, sources said, adding this would be removed and FDI up to 74 per cent would be allowed directly.
The existing guidelines of security clearance for FDI in telecom sector would continue and the FDI approvals would be conditional.