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Govt may ease FDI rule on JV partners

business Updated: Sep 11, 2010 00:00 IST
HT Correspondent

The government has made a strong case for allowing foreign investors to bring in fresh money and technology to India even without demonstrating that such an investment would not adversely affect an existing joint venture with a local partner.

Under present norms, a foreign company that has entered India before January 12, 2005 has to acquire government approval and "demonstrate" that such fresh investments in the same area would not affect the an existing JV in India.

"There is a need to examine whether such a conditionality continues to be relevant in the present day context," the department of industrial policy and promotion (DIPP) said in a discussion paper floated on Friday.

It has invited comments from stakeholders by Oct 15.

"Competition today is not only between domestic players inter-se but also between international and domestic players. If an industry is discouraged from being set up in India, it could be set up in a neighbouring country, with whom a trade agreement exists or is being negotiated," it said.

The Indian industry today is in a much stronger position than it was in the 1990s, when the condition was first introduced.

"It, therefore, needs to be seen whether there is a need to continue with the elements of such a regime even today," the discussion paper said.

With more than five years having elapsed, it can be argued that the issue of "jeopardy" is, no longer relevant, as the Indian partners could have recovered their investments substantially during this period of time.