Inter-ministerial meeting on FDI caps on July 1

The meeting will be headed by DIPP Secretary Saurabh Chandra

The DIPP has called an inter-ministerial meeting on July 1 to discuss the Finance Ministry's proposal for raising FDI caps in several sectors including defence, telecom and multi-brand retail.

The meeting will be headed by Secretary in the Department of Industrial Policy and Promotion (DIPP) Saurabh Chandra.

"The Finance Ministry has suggested several changes in the FDI regime. Officials will discuss how to move forward on those proposals. The meeting will happen on July 1 and 2," a senior official in the DIPP said.

The official-level meeting will be followed by a minister-level meeting.

To promote India as an investment destination, Finance Ministry had favoured higher sectoral caps in almost all sectors, including defence, multi-brand retail and telecom.

Virtually doing away with the 26% ceiling, a committee headed by Economic Affairs Secretary Arvind Mayaram recommended that FDI limit be raised to 49% in almost all sectors through automatic route.

The committee suggested that FDI in defence be raised to 49% under the government approval route, from 26% at present. Besides, it has proposed to increase FDI cap to 74% in the multi-brand retail trading under the government approval route.

It also proposed raising the cap to 49% under automatic route in sectors like single-brand retail, existing pharma companies, power and commodity exchanges, PSU banks, tea plantation, print media, asset reconstruction companies, stock exchanges, insurance and satellite services.

In the civil aviation sector, the committee suggested 100% FDI in non-scheduled air transport services under the automatic route as against 49%.

FDI inflows in India registered 38% decline to $22.42 billion in 2012-13.

Further, the official said the DIPP has moved a draft cabinet note on expanding the definition of "control" for calculating foreign investment, direct and indirect, in an Indian company.

At present, a company is considered as "controlled" by resident Indian citizens if the power to appoint a majority of the directors on its board is held by Indian companies and citizens.

It was felt this definition was not comprehensive enough to cover all possible ways in which "control" was exercised in corporate entities.

"The proposed new definition in the note is slightly different than that in the Companies Bill, 2012," the official added.

The issue assumes significance as the Foreign Investment Promotion Board had deferred a decision on the Jet-Etihad deal and reportedly sought more clarity on the ownership structure and the level of control to be exercised by the Gulf carrier.