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Finance Minister Speech : Foreign Investment
Foreign Investment
44. Progressive liberalization has taken place in the provisions relating to foreign investment. I propose to take the following further measures:
lForeign Institutional Investors (FIIs) can invest in a company under the portfolio investment route up to 24 per cent of the paid up capital of the company. This can be increased to 40 per cent with the approval of the General Body of the shareholders by a special resolution. I propose to increase this limit to 49 per cent.
lForeign Direct Investment (FDI) in Non-Banking Financial Companies (NBFCs) is permitted on a case by case basis upto 100 per cent but with a condition that a minimum of 25 per cent of their holding is divested in the domestic market. This condition is being removed, provided the foreign investors bring in a minimum of US $50 million. FDI in NBFCs will now be put on the automatic route subject to RBI guidelines.
Structural Reforms45. In order to accelerate growth in the Indian economy, we have now to address some of the difficult areas of reform that have not been tackled so far.
46. There are four significant areas where a price and distribution control regime exists. These are the areas of petroleum, fertilizer, sugar and drugs.
Administered Pricing Mechanism (APM)
Petroleum
47. As Hon’ble Members are aware, Government had, in November 1997, notified the details of dismantling of the Administered Pricing Mechanism (APM) in the petroleum sector by March 2002. I propose to adhere to this deadline. A time bound action programme is being prepared for the deregulation of APM by March, 2002. My colleague the Minister of Petroleum and Natural Gas will be outlining the road map for this separately.
Fertilizer
48. Hon’ble Members will recall that I have in the past referred to the rationalisation of fertilizer pricing with the objective of phasing out the existing retention price scheme (RPS) in the medium-term. Government has now decided to implement the recommendations of the Expenditure Reforms Commission for a phased programme of complete decontrol of urea by April 1, 2006. The following steps would be taken in the first phase commencing from April 1, 2001:
l. The unit specific RPS will be replaced by a Group Concession Scheme. The current MRP arrangement will be continued and the concession for each group calibrated to enable the units to sell urea at the stipulated MRP.
lThe rate of concession for urea units based on naphtha/FO/LSHS will be linked to international prices of these feed stocks.
Sugar49. Government is committed to complete decontrol of sugar. But this must be irreversible. Government has decided to introduce futures/forward trading in sugar within the coming year, a step that is necessary before full decontrol. Sugar under the Public Distribution System will continue to be supplied to ration cardholders in the special category states, hill states, island territories and to BPL families in other states and UTs. Such supplies can even continue after sugar is completely decontrolled. The retail issue price of sugar under the PDS is being revised to Rs 13.25 per kg. with effect from March 1, 2001.
