'Hiking FDI cap certain sectors may not augur well for Govt'

DMK chief M Karunanidhi, whose party had quit the Congress-led UPA early this year, today opposed Centre's hiking of FDI cap in certain sectors, including Telecom and Defence, saying it may not augur well for the government ahead of next year's Lok Sabha elections.
"Centre's prescription to address the grim economic situation would only lead to "side-effects" and result in manifold problems," he said.
In big-ticket reforms push, the UPA government on Tuesday decided to hike foreign direct investment (FDI) in a dozen sectors, including 100 per cent in telecom and higher caps in insurance and defence sectors, to boost the sagging economy.

"Centre allowing 100 per cent FDI in Telecom would allow foreign companies to take over complete control of joint venture initiatives with Indian firms, leaving the latter with some little foreign investment in the lurch," he said in a letter to partymen.
State-run BSNL was already incurring losses for the past few years, he said quoting statistics.
"But our Central government has opened up avenues for revenue generation for foreign companies," Karunanidhi said.

On the insurance front, the Centre had opted for a "short-cut" to increase FDI cap to 49 per cent from 26 per cent despite a Parliamentary Standing Committee's recommendation against it and if that be the case what was the need for a standing committee at all, he asked.

At a high level meeting chaired by Prime Minister Manmohan Singh, it was decided to raise the sectoral FDI cap from 26 per cent to 49 per cent under automatic route under which companies investing do not require prior government approval.
A Bill to raise FDI cap in the sector is pending in the Rajya Sabha.