The ministry of home affairs has received more than 20 proposals for foreign direct investment (FDI), including from China and Hong Kong, requiring security clearance between April and May.
‘We are vetting some of these proposals which have come from various sectors. One of the applications is from a well known start-up,’ an official said. ‘We await inputs from Research and Analysis Wing, intelligence agencies, external affairs ministry, and embassies.’
In sync with the current sentiment, the Union home ministry is likely to stall security clearance to a clutch of Chinese companies seeking to invest in India, according to officials close to the development.
The ministry of home affairs (MHA) received more than 20 proposals for foreign direct investment (FDI), including from China and Hong Kong, requiring security clearance between April and May.
“We are vetting some of these proposals which have come from various sectors. One of the applications is from a well known start-up,” an official said.
Six proposals for close to Rs 1,000 crore are under strict scrutiny, he said.
“We await the inputs from the Research and Analysis Wing, intelligence agencies, external affairs ministry, and embassies,” he pointed out, at a time when Chinese investments are under scrutiny across sectors, following the border face-off.
The proposals are from sectors like information technology, internet business, and infrastructure, among others. The list also includes trading- and logistics-related projects.
Recently, India tightened the foreign direct investment (FDI) policy for neighbouring nations, with focus on China. This also applies to transactions where the beneficial owner of the investment is from China. The amendments were made to curb opportunistic takeovers or acquisitions of Indian companies due to Covid-19.
This is applicable to all sectors and not just in historically sensitive or critical ones, such as telecommunications, banking, insurance, defence and so on, said another official privy to the matter.
Sources in the ministry also hinted that if border tension escalated, India might put China under ‘prior referral category’ status.
This implies that visas will be issued after running a thorough background check on individual applicants from those countries.
The home ministry is the nodal authority to provide security clearance to foreign investment under the National Security Clearance Policy.
Experts say that in the current situation, obtaining security clearance is quite a task.
“The processing of FDI applications for government approvals takes between 8 weeks and 10 weeks, depending on the proposal and the ministry concerned. It is the subject of national security, which is mostly opaque and the ministry is not obliged to provide the reason for delaying an application or even revoking a proposed investment,” said an FDI expert.
According to him, a total of 14-15 parameters are fixed in eight to nine sensitive areas like telecom, ports, and civil aviation. And in case of delay in clearance, the applicant cannot seek judicial intervention.
In the past few years, several tech companies and start-ups have attracted investment from China. Between 2015 and 2019, the home ministry has given security clearances to more than 6,000 investment proposals, most of which were from China, Singapore, the UK, and Hong Kong.
However, in 2019-20, Chinese foreign investment stood only at $160 million, according to the official data.