India will commit itself to 100 per cent foreign direct investment in real estate development and 49 per cent FDI in telecom from Singapore under the Comprehensive Economic Cooperation Agreement between the two countries.
Thus, the FDI cap for Singapore in these sectors will not come down below this limit even if India decides to lower the same on a later date.
This is the first time that India is binding itself to FDI caps higher than what it has committed to the World Trade Organisation. The country has committed a 25 per cent FDI cap on telecom services to the WTO, though it has on its own accord raised it to 74 per cent.
However, Singapore has demanded that the binding FDI cap be raised to 74 per cent under the new agreement.
India has, however, not agreed to extend the concessions to FDI from Singapore in retailing and courier services under the CECA, officials said.
The CECA is expected to be cleared by the cabinet soon and is slated to become effective from July 1, 2005.
Under the CECA, India will extend tariff concessions on 11,653 items, while 6,527 products have been retained on the negative list.
Officials said 506 products would get duty-free access under the early harvest scheme, while tariffs on 2,327 products would be removed in a phased manner between April 2006 and March 2009.
India has also agreed to grant preferential access to 2,293 products from Singapore where tariff will be up to 50 per cent lower than the most favoured nation rate.
The preferential access would also be provided in a phased manner up to March, 2009.
Professionals from India and Singapore drawing salary equivalent to 2,500 Singapore dollars in the island nation would not be denied a visa. This includes the basic salary as well as allowances paid in India and Singapore.
But there is disagreement over the Double Taxation Avoidance Agreement pertaining to capital gains.
Officials said that the finance ministry is not willing to amend the existing DTAA to provide exception for capital gains due to Singapore's unwillingness to share information on the administration of income tax laws.
The ministry is also opposed to extending preferences in tariffs to Singapore for import of capital goods for its infrastructure projects in India. It has also rejected the proposal to expand the list of infrastructure projects, which are currently eligible for preferences.
While India and Singapore have agreed that all juridical persons registered in Singapore or India would be included in the CECA irrespective of ownership or control, the CECA would contain a 'special carve' for telecommunication, education and audio visual sectors. The proposal has been made with regards to the FDI bindings.
In each of these sectors, the requirement of ownership and control by nationals of both countries would be mandatory for up to three years after the CECA comes into effect.
Officials said there is also a provision for reviewing the 'special carve' after 18 months of entry into force of the CECA.
Points of discord
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Singapore companies should be treated at par with Indian firms
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Commitments on services that can be delivered electronically (cross-border supplies)
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Information sharing under the DTAA
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All tariff reduction to start with the early harvest scheme
- Preference for capital goods imported from Singapore
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