3-5 Yr Shelter Likely For Local Fmcg Cos
The Bharatiya Janata Party (BJP) has identified only fast-moving consumer goods and consumer non-durables as non-priority areas in which no fresh foreign direct investment (FDI) will be allowed by the Vajpayee government for a period of three to five years.
A consensus has emerged within the government to give Indian industry a transition period within which it should become efficient enough to take on foreign competition. The existing foreign ventures in these areas, however, will not be disturbed.
Outlining the BJPs definition of priority and non-priority, Dr Jagdish Shettigar a key figure in the partys economic think-tank and member of its national executive committee told Business Standard that the government would consult industry and experts before arriving at the exact length of the transition period.
According to current thinking, the transition period should be five years, although Atalji thinks three years may be the right length of time. The manifesto said seven-eight years. But that is seen as too long, said Shettigar, who has played a major role in drafting BJP manifestos over the years and the recent national agenda.
A detailed policy governing FDI being prepared by the economic think-tank of the BJP and its allies will be announced as part of the budget. Shettigar, however, made it clear that consumer durables including white goods, electronic goods and automobiles are considered priority areas, as they involve high technology and provide quality to the consumer. This comes as a relief for multinationals active in these sectors, which have been keeping their fingers crossed over the BJPs policy.
Even in the FMCG sector, proposals pertaining to non-priority areas but involving high technology, having positive impact for the consumer and not posing competition to any domestic player may be considered on merit by the industry ministry, said Shettigar. We may leave some room here for detailed discussion, but the method will be totally transparent, he said.
On whether foreign entities would be required to bring in only the latest technology, Shettigar said they may be allowed to bring in slightly old technology if it is far superior to what the country has. In some cases, our technology is so old that we cannot demand state-of-the-art. We have to be realistic. However, the technology being brought in even if slightly old must be far superior to what we have, said Shettigar.
Shettigar said the government would seek a commitment from the domestic industry that it would gear up to face foreign competition in the prescribed period.
We want to give them the chance, since they have been complaining that they got no time to adjust to the deregulated regime. They completely ignored research and development during the controlled regime. But if they still fail to become competitive, they will have to take the blame, said Shettigar.
The BJP think-tank feels that a ban on FDI in non-priority areas would help divert resources to the priority sectors. Since 1991, an overwhelming portion of foreign investment has flowed into consumer goods. This has not resulted in any significant benefit for the consumer. Only the wafers have become thinner. We recognise the right of the consumer to the highest quality at the lowest price. But in a developing stage, the consumer has to sacrifice a little, said Shettigar.
On the dispute between the government and Suzuki Motor Co, Shettigar said the Japanese partners decision to initiate international arbitration over the appointment of managing director RSSLN Bhaskarudu was a violation of the joint venture agreement.
He said it was a mistake on the part of the Congress government to turn Maruti Udyog into a 50:50 venture.
The BJP think-tank also feels a need to review the policy governing 100 per cent export-oriented units (EoUs). At present, 100 per cent EoUs are allowed to sell a sizeable portion of their output in the domestic market. The entire output should be exported. Exemption can be made only for rejected goods, Shettigar emphasised.