NoC for foreign partners axed
Archana R D
15 January 2005
The PM deletes a major FDI bottleneck, easing business conditions for foreigner investors.
Last year when Japanese cars major Suzuki wanted to set up a new venture its own, the government forced it to stick with its Indian partner, Maruti Udyog.
Similarly other Indian companies have effectively prevented their overseas collaborators from striking out on their own. Examples: Asian Paints (ICI), Dabur (Nestle), Modi (Walt Disney), YK Birla (Kennametal), Baron (TCL), Usha Group (Draeger) and Graphite India (Amiantit). In each of these collaborations, the stumbling block for the foreign partner was a piece of regulation called Press Note 18 introduced in 1998.
Press Note 18 had stipulated that all foreign partners in JVs require a no objection certificate (NoC) from their Indian partners.
This week, prime minister Manmohan Singh announced the withdrawal of the NoC clause in Press Note 18. Now, foreign investors with more than three per cent stake in joint ventures being formed henceforth will need a single window clearance from the government alone. Effectively the move spreads out a red carpet to many billion-dollar companies, which want to extend their operations in Asia''s fourth largest economy.
Under the revised guidelines issued under the new Press Note 1 all new FDI proposals will be approved automatically, subject to sectoral policies regarding limits of equity holdings by the foreign partners, and the strategic importance of the sector. The revisions come into effect immediately.
