No country-specific blocks to FDI, but locations matter: Govt

NEW DELHI: The home ministry may settle for keeping away country-specific restrictions on foreign investments, but is firm on incorporating sectoral and locational threats while clearing fresh FDI proposals.

“The MHA is clear on the need for case-to-case security clearance to FDI on two counts: if it relates to a sector perceived by the security agencies as “critical” and, secondly, if it is proposed to be located near the international border or in close proximity of any vital installations,” a senior ministry official told ET.

On the eve of Chinese Premier Hu Jintao visit to the country, certain sections of the government are of the view that Beijing in particular must not be targeted for keeping out FDI on security grounds. Left is particularly keen that the air on FDI proposals from China is cleared before the high-profile’s visit.

However, even though the finance ministry is said to have objected to MHA’s proposal for tough restrictions on foreign investment from China, the latter is unwilling to dilute its stance and has decided to insist on keeping out any FDI that targets “critical” sectors like telecom, airports, aviation, shipping and ports, ISPs, gas pipelines, defence industries, roads and petroleum refining, etc.

Also, where the foreign investor is proposed to set up its establishment in an area that is either too near to the border (possibly, within a range of 50 km) or in states facing internal disturbances like Naxalite violence, or is in close proximity of vital installations like atomic plants, space and defence installations, the Union home ministry strongly recommends case-to-case security clearance.

The fact that locational and sectoral restrictions are likely to take care of the threats that Chinese investment may pose to national security — Chinese FDI is mostly into sectors like telecom and ports, both classified as critical and thus not qualifying for automatic approval beyond a point, and not allowing SEZs in border and violence-hit states and near sensitive installations will prevent Chinese agencies from snooping — has relaxed security agencies here, and there is a fair chance of country-specific restrictions on FDI not including Chinese investment in their purview.