In order to liberalise the FDI regime, the government is likely to dispense with a norm that requires foreign investors to seek local partner approval for setting up units in the same area of business.
The decision to do away with the Press Note 1, according to sources, is likely to be taken by the Committee of Secretaries (CoS) which will meet here tomorrow under the chairmanship of Cabinet Secretary KM Chandrasekhar.
“CoS will take up the issue tomorrow…it needs to be scrapped as it is restricting several foreign firms to invest in India,” sources said.
Press Note 1 of 2005 seeks to protect the interest of domestic companies in joint ventures by ensuring that foreign companies obtain the permission of their local partner, if they decide to go it alone or partner with another Indian company in the same line of business as the existing venture.
Industry sources said scrapping of the Press Note will help the country to attract more FDI, at a time when India’s foreign direct investment has shown a fall.
India’s FDI during April-January 2010-11 declined by 25 per cent to USD 17 billion from USD 22.9 billion in the same period last year.
Department of Industrial Policy and Promotion, which deals with FDI related matters, is of the view that scrapping of Press Note 1 would go a long way in attracting FDI. It would also send a very positive message to foreign investors investing in India.
If the CoS makes the changes in the FDI regime, it would be reflected in the Consolidate FDI document scheduled to be released on March 31.