Govt readies plan for FDI in railways and e-commerce
May, 27th 2014
The commerce and industry ministry is ready with proposals to allow foreign direct investment in railways and e-commerce, while easing the rules for overseas investors to enter the defence production space, which has seen zero participation despite the recent opening up.
Sources said the department of industrial policy and promotion (DIPP) is ready with the cabinet notes but will await cues from the new government on the level of FDI to be allowed. "It's just a matter of filling up the percentages," said a senior government official, who did not wish to be identified.
The issues are going to be presented before Narendra Modi, when he meets secretaries from the key ministries to take stock of the situation. He is also expected to state the BJP government's stand clear on FDI in multi-brand retail, which the party has repeatedly opposed, including in its election manifesto.
Experts and consultants, however, cautioned against a rollback of the FDI policy, arguing that it will send a negative message to the international investors. "It will be as bad as the retrospective amendments to the tax laws to get Vodafone in the tax net. What we need is a signal that India is open for business," said a source.
While the ceilings are yet to be decided, sources indicated, that the government could allow 100% FDI in the sector, with certain conditions. "You already have a situation where local players are circumventing the rules and their growth is stifled. So, it will be better to make the rules clear," said a source.
In case of railways, the plan was to allow 100% FDI in high-speed train systems, suburban corridors, high-speed tracks and freight lines connecting ports and mines. But, the UPA government did not clear the proposal.
In defence production, where the cap was eased from 26% on a case to case basis, the rules give a lot of powers to the defence ministry besides lacking clarity.