New FDI policy to ease norms for investors

 The third edition of the Consolidated FDI Policy Circular may contain guidelines on domestic companies issuing shares to foreign entities for considerations other than cash with a view to check possible FDI policy violation and money laundering, a source said.

The need for such norms is being felt in the wake of an increasing number of cases where shares are issued against non-cash considerations like trade payables and import of capital goods.

Sources added the new Circular may also give relaxation in a 13-year FDI rule by 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 January 12, 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.

In September last year, the Department of Industrial Policy & Promotion (DIPP), the nodal agency on FDI policy, had floated discussion papers on these two issues.

The government in 2010 had decided to come out with consolidated FDI policy paper summarising all the regulations, including those of Fema and RBI, for the benefit of foreign investors, from March 31 2010 and revise it every six months.

The consolidated document aims at helping foreign investors as it contains all the current regulatory framework and subsumes all FDI policies announced prior to release of the paper. It also has regulations on FDI, contained in FEMA and RBI circulars.

FDI inflows in the country was USD 18.3 billion during April-February 2010-11, down 25 per cent from USD 24.6 billion in the same period last fiscal.