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  • Govt for relaxing FDI rules governing JVs

    Published on September 11, 2010

    Proposing a major relaxation in a 12-year FDI rule, the Industry Ministry on Friday made a case for allowing foreign investors to bring in fresh money and technology to India irrespective of the impact on local partners in any existing joint venture.

    Under the present dispensation, a foreign player who entered India before 12th January, 2005 has to take government approval and “demonstrate” that fresh investment in the same field would not affect interest of his domestic joint venture partner.

    The FDI rules proposed to be relaxed was not applicable to the joint ventures entered after 12th January, 2005. Thus, the changes would help foreign investors who entered JVs after this date.

    Suggesting abolition of this rule, the Department of Industrial Policy and Promotion (DIPP) said in a discussion paper, “There is a need to examine whether such a conditionality continues to be relevant in the present day context.”

    It has invited comments from the stakeholders till 15th October.

    It said that in an era of globalisation, where a number of free trade agreements are in place, the domestic industry has to increasingly become more competitive.

    “Competition today is not only between domestic players inter-se but also between international and domestic players. If an industry is discouraged from being set up in India, it could be set up in a neighbouring country, with whom a trade agreement exists or is being negotiated,” it said.

    In the last one year, India has entered into market opening trade pacts with ASEAN and South Korea.

    Besdies, it is also a leading member of SAARC pact comprising nations of Indian sub-continent.