Govt allows 100% FDI in telecom, hikes insurance cap to 49%

PTI | Jul 16, 2013, 08.05PM IST

NEW DELHI: Opening the doors to shore up foreign investments, the government on Tuesday liberalisedFDI limits in a dozen sectors, including allowing 100 per cent in telecom and higher limits in 'state-of-the-art' defence manufacturing, to boost the sagging economy.

The Foreign Direct Investment (FDI) cap for civil aviation was, however, left unchanged at 49 per cent.

While the FDI cap in defence sector remained unchanged at 26 per cent, higher limits of foreign investments in 'state-of-the-art' technology manufacturing will be considered by the Cabinet Committee on Security, commerce and industry minister Anand Sharma told reporters here.

In the contentious insurance sector, it was decided to raise the sectoral FDI cap from 26 per cent to 49 per cent under automatic route under which companies investing do not require prior government approval. A Bill to raise FDI cap in the sector is pending in the Rajya Sabha.

"Consensus" on raising FDI limits in some sectors and relaxing the route in others was arrived at a meeting Prime Minister Manmohan Singh took with his key ministers, Sharma said.

It was decided to allow 49 per cent FDI in single brand retail under the automatic route and beyond through the Foreign Investment Promotion Board (FIPB).

Besides civil aviation, Sharma said, no view was taken on relaxing FDI caps in airports, media, brownfield pharma and multi-brand retail.

In case of PSU oil refineries, commodity bourses, power exchanges, stock exchanges and clearing corporations, FDI will be allowed up to 49 per cent under automatic route as against current routing of the investment through FIPB.

The decisions taken on Tuesday were based on recommendations of Mayaram Committee which had suggested relaxing investment caps in about 20 sectors, but the meeting approved only in 12.

In basic and cellular services, FDI was raised to 100 per cent from current 74 per cent. Of this, up to 49 per cent will be allowed under automatic route and the remaining through FIPB approval.

A similar dispensation would be allowed for asset reconstruction companies and tea plantations.

FDI of up to 100 per cent was allowed in courier services under automatic route.

Earlier, similar amount of investment was allowed through FIPB route. In credit information firms 74 per cent FDI under automatic route would be allowed.

Highlights:

* FDI cap in telecom raised to 100% from 74%; up to 49% through automatic route and beyond via FIPB

* No change in 49% FDI limit in civil aviation

* FDI cap in defence production to stay at 26%, higher investment may be considered in state-of-the-art technology production by CCS.

* 100% FDI allowed in single brand retail; 49% through automatic, 49-100% through FIPB

* FDI limit in insurance sector raised to 49% from present 26%, subject to Parliament approval

* FDI up to 49% in petroleum refining allowed under automatic route, from earlier approval route

* In power exchanges 49% FDI allowed through automatic route, from earlier FIPB route.

* Raised FDI in asset reconstruction companies to 100% from 74%; of this up to 49% will be under automatic route

* FDI limit increased in credit information companies to 74% from 49%.

* FDI up to 49% in stock exchanges, depositories allowed under automatic route

* FDI up to 100% through automatic route allowed in courier services

* FDI in tea plantation up to 49% through automatic route; 49-100% through FIPB route

* No decision taken on FDI cap in airports, media, brownfield pharma and multi-brand retail.