A major review of the foreign direct investment (FDI) policy is expected in the coming weeks to raise ceilings in several key sectors, including real estate, petroleum refining, commodity exchanges and aviation.
The policy, which has been in the works for a few months now, is set to be approved and could allow public sector oil companies to divest up to 49 per cent equity in refineries. A precedent has been set when a LN Mittal group company acquired 49 per cent in Hindustan Petroleum’s Bhatinda refinery.
The policy, once approved, could allow foreign institutional investors (FIIs) to participate in public issues of real estate companies. At present, FII investment in realty firms is only allowed in the secondary market because investment in public issues is considered FDI.
FIIs cannot invest in pre-issue private placements and under the current guidelines of the Securities Exchange Board of India (SEBI) any such placement is locked-in of 12 months.
The commerce and industry ministry, which has piloted the policy, has proposed that a clarification needs to be issued to separate portfolio investment from FDI.
It has also proposed to allow 100 per cent FDI in mining of titanium bearing minerals, its value addition and integrated activity. FDI up to 100 per cent will be allowed only if the value addition facilities are set up in India along with transfer of technology.
Commodity exchanges such as Multi-commodity exchange (MCX) and National Commodities and Derivatives Exchange (NCDEX) can look forward to more foreign money with the government proposing to allow up to 49 per cent. This includes portfolio investment of up to 24 per cent.
FDI in some areas of the aviation sector--chartered airlines, cargo and ground handling services—is likely to be allowed up to 74 per cent. Maintenance, repair and overhaul, where foreign aviation giants Boeing and Airbus have shown keen interest, is likely to be opened for 100 per cent FDI.