Promoters bona fides stall FDI proposal

The Union Cabinet today postponed a decision on one Foreign Direct Investment (FDI) proposal after at least three ministers raised strong objections about the investing entity, disclosed a minister who didn’t want to be named.

While around 55 proposals were cleared today, this item was deferred on the formal reasoning that while the front company and the shell company appeared to have bonafide operations, the identity of the promoters were not clear.

The matter was first raised by Parliamentary Affairs minister Vayalar Ravi and was echoed by Panchayati Raj minister Mani Shankar Aiyar. Objections were raised about the company being possibly based in Mauritius and engaged in round tripping (disguising as FDI the capital which originally came from here, to get around regulations). Home Minister P Chidambaram asked the cabinet generally whether they knew the promoters’ identity. With Industry and Commerce Minister Kamal Nath absent today, other ministers couldn’t answer the question. Ravi also asked why the proposal was being passed so hurriedly.

It was decided to defer a decision till the return of Prime Minister Manmohan Singh, the minister said.