Kamal Nath spares China the FDI check

NEW DELHI: Just ahead of Chinese president Hu Jintao’s visit to India starting November 20, commerce and industry minister Kamal Nath has put a spanner in the National Security Council’s (NSC) plan to bring a new law to scan FDI from a host of countries, including China, from the security angle. His department of industrial policy and promotion (DIPP), the nodal agency for FDI policy, has rebuffed most of the NSC’s proposals in a formal reply sent to the council’s detailed notes in this respect last week.

According to the DIPP, there is no need for a stringent entry-level security check for FDI. Neither is there a need for a new act for this purpose as recommended by the NSC. Security concerns can be best addressed by licence and contract conditions, the DIPP said, broadly supporting the NSC view that tenders and agreements entered into by central and state governments should have a clause for national security.

Denouncing the NSC’s controversial proposal to expand the scope of country-wise and sector-wise proscriptions/restrictions on FDI for security reasons, the DIPP said this was totally unwarranted. Currently, FDI from Pakistan and Bangladesh is banned in the light of perceived security threats.

The NSC had proposed entry-level screening of FDI from a host of countries such as China, North Korea, Afghanistan, and also tax havens like Mauritius, Cyprus and Cayman islands, particularly in sensitive infrastructure sectors.

Other key economic ministries — the finance ministry and the department of telecom — have also voiced their dissent over the NSC’s proposals.

While finance minister P Chidambaram had virtually negated the NSC suggestions saying a couple of instances of denying FDI proposals from China should not be taken as the norm, telecom minister Dayanidhi Maran had said that while national security was supreme, there was no need to overreact on this front.

Finance ministry sources had earlier told ET that more entry-level restrictions were not necessary as sectoral regulations could address security issues.