The government on Friday cleared the way for $50-million foreign direct investment (FDI) from Pepsico, by exempting the beverages major from fulfilling a requirement to divest 49 per cent stake in bottling firms to Indian companies.
The decision was taken by the Cabinet Committee on Economic Affairs since guidelines for food processing sector now allows 100 per cent FDI, said Kapil Sibal, science and technology minister. “When Pepsico India Holding Private Ltd first invested in India, guidelines for investment were different. The guidelines have changed now.”
The CCEA has decided to delete the previous requirement, a decision that would result in FDI inflow of $50 million into the country.
A Pepsico India Holding spokesperson refused to comment on the decision on the ground, saying he wasn’t aware of the details of the CCEA decision.
When Pepsico Holding came to India in 1997, it was asked to mandatorily disinvest 49 per cent of equity in its Indian bottling arms to domestic companies in 5 years.
Pepsico's case for waiver from the divestment requirement was heard by the Foreign Investment Promotion Board (FIPB) for the third time in October last year. It had subsequently referred the case to the CCEA.
Pepsico India Holding has 100 per cent stake in Aradhana Soft Drinks Company and the deadline for divesting stake expired in 2007.
The decision would enable Pepsico to bring in much-needed FDI into the country, as the economy faces a dearth of capital.