Currently, overseas investment, including via FIIs and FDI, is capped at 49% in commodity exchanges
New Delhi
Streamlining procedures to boost foreign investment into the country, the commerce and industry ministry on
Monday allowed Foreign institutional investors ( FII) to invest up to 23 per cent in commodity exchanges without seeking its prior approval.
Currently, total overseas investment, including via FIIs and FDI, is capped at 49% in commodity exchanges.
Within this overall limit, investment by registered FIIs was limited to 23 percent and investment under the FDI scheme was limited to 26 percent.
For both FDI and FII categories, prior government approval was required.
Besides, to discourage import of sub- standard machinery, the government decided to withdraw the facility of giving equity in lieu of import of second hand equipment, according to the new edition of the consolidated FDI policy, which takes shape from Monday.
The policy document has been produced by the Department of Industrial Policy and Promotion ( DIPP).
The government has also made certain other procedural changes in the circular and incorporated announcements made with regard to 100 per cent FDI in single brand and relaxation of guidelines for pharmaceutical sector.
” Such investment ( up to 23 per cent) by FIIs, in commodity exchanges, will, therefore, no longer require Government approval,” it said. However, FDI will continue to need the approval of the FIPB. DIPP has also decided that the consolidated FDI circular will be announced every year instead of six- monthly basis. The next policy would be on March 29, 2013.
Experts said that there were no major changes in the circular. ” DIPP has done only procedural changes,” PwC executive director Akash Gupt said.
The policy has clarified that subject to the sectoral foreign holding cap, firms will now need prior permission from RBI for an overall FII holding of beyond 24 %. After RBI approval, companies can allow FIIs to hold more than 24 % after the approval for the same by their boards and shareholders.
Further, the government has also permitted foreign venture capital investors ( FVCIs) to invest in the eligible securities like equity and debt, by way of private arrangement and purchase from a third party also, subject to stipulated terms and conditions.
Sub- standard imports In order to discourage import of sub- standard machinery, the government has decided to withdraw the facility of giving equity in lieu of import of second hand equipment.
” With a view to incentivise machinery embodying state- of – the- art technology, compliant with international standards, in terms of being green, clean and energy efficient, second- hand machinery has now been excluded from the purview of this provision,” it said.
Industry has raised concerns with the government that the Indian capital goods sector, including the machine tools industry, construction and textile machinery, has been suffering because of import of cheaper second hand machinery, which is often substandard.
During April- January, 2011- 12, India attracted FDI worth USD 26.19 billion, an increase of 53 per cent over the same period last year.
