Danone needs NOC from Wadias: FIPB
Our Corporate Bureau
28 September 2007
It has also observed that Danone is trying to use the FIPB to avoid the repercussions of the Department of Industry ruling. This could upset Danone's plans and give the Wadias a better bargaining clout.
Danone's solo India entry is fraught with controversy. The FIPB has said that Danone is trying to use the "FIPB to avoid the repercussions of the DIPP findings". In a letter dated 21 September, the FIPB told Danone that it needs government approval, as well as an NOC from the Wadias to enter India on its own. This is in line with what the Department of Industry told Danone in June.
Subsequently, Danone wrote to the finance secretary, who heads the FIPB stating, "It is indeed surprising that DIPP has raised the issue of Press Note 1, for the proposal of the investment, by Groupe Danone, where there is no such proposal being made by us to the government."
Danone had informed the government that it was in the process of introducing its dairy products and was setting up a greenfield unit. Danone argued that the proposed project is an old one, for which it had got approval in 1996.
The DIPP however said, that Danone's approval had lapsed in 2003 and the proposed project was different from the one approved earlier.
The FIPB has observed in an internal note that "Groupe Danone, which was communicating with DIPP till now, suddenly started communicating with FIPB (after getting this ruling from DIPP). It started sending communication to FIPB, stating that their entry into the dairy business is not a new venture, it is merely an implementation of old approval of 1996. Considering the matter in which Groupe Danone is trying to use the FIPB to avoid the repercussions of the findings of DIPP, it is proposed that we clarify to Groupe Danone that their understanding is not correct."
The government has also issued a stern warning to Danone that while the FDI policy in India is investor-friendly, any non-compliance would force the government to take appropriate action under relevant laws.