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Easier FDI in oil retailing

Partha Ghosh in New Delhi | December 01, 2003 12:27 IST

The government is all set to relax foreign direct investment caps on petroleum refining, marketing and exploration and on printing and publishing businesses even as the administrative ministries for civil aviation, telecommunication, etc, continue to debate whether a move to further liberalise their sectors will be prudent.

"We have received the feedback from the petroleum and natural gas ministry to further opening up the sector. We have also received a go-ahead from the information and broadcasting ministry to allow FDI in printing and publishing of scientific journals. We are ready to move a note to the Cabinet," a senior industry ministry official told Business Standard.

The proposals are being forwarded in line with the recommendations of the NK Singh Committee on FDI. Singh had outlined raising the FDI cap in several sectors.

But only four sectors -- petroleum, printing and publishing of scientific journals, civil aviation and telecom -- got the approval of the group of ministers.

The Cabinet, however, could not take a decision due to lack of consensus.

As per the NK Singh Committee recommendations, made public this year beginning, FDI limit on public sector petroleum refining firms will be increased from the current 26 per cent to 100 per cent, and will be put on the automatic list.

As regards to oil marketing companies, the cap will be raised from 74 per cent to 100 per cent and the applicants will be allowed to take the automatic route.

FDI in petroleum exploration (small fields through the bidding route) will be 100 per cent (unchanged), but can be done through the automatic route.

For petroleum exploration in unincorporated joint ventures, the cap will be raised from 60 per cent to 100 per cent, while that in the case of incorporated joint ventures will be raised from 51 per cent to 100 per cent.

The committee had also recommended 100 per cent FDI in printing and publishing of scientific journals.

The cabinet note on FDI in petroleum and printing and publishing of scientific journals are likely to be moved along with the proposal to increase foreign holding in private banks.

There is a recommendation to increase the composite foreign holding in banks to 100 per cent, with a cap of 74 per cent on both the FDI as well as FII (foreign institutional investment) inflows.

The issue is still being discussed between the finance and commerce and industry ministries, the industry ministry source added.

He said in case the proposal was approved, the FII limit in banks would be increased to 74 per cent from the current 49 per cent.

But whenever the FDI component would hit the 74 per cent ceiling, the FII share would get limited to 26 per cent.

The proposal to increase FDI limit in telecom services (cellular and landline) to 74 per cent from the existing 49 per cent has hit a roadblock with the security agencies objecting to any further relaxation.

The civil aviation ministry is expected to lay out the FDI guidelines in the Aviation Policy which is being drafter by the Naresh Chandra Committee.

The committee is leant to have recommended a 40-49 per cent FDI and participation by foreign airlines in its initial draft.

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