New Delhi: A comprehensive proposal to review the foreign investment norms, seeking to raise the investment cap to 49% in commodity exchanges and PSU oil refineries, will soon be taken up by the Cabinet for approval.
“The Department of Industrial Promotion and Policy is preparing a note in this regard, which will be soon sent to Cabinet for clearance,” official sources told PTI.
The note is likely to cap foreign investment in commodity exchanges at 49%, with limits on FDI at 26% and FIIs at 23%, similar to the ceiling in stock exchanges, the sources said.
But an individual entity is likely to be allowed to pick only up to 5% in commodity exchanges, they said.
This means foreign investors like New York Mercantile Stock Exchange will be able to buy up to 5% in bourses like Multi Commodity Exchange and NCDEX.
The sources said those foreign investors that already have more than 5% in commodity exchanges would be given some time to bring down their stake to 5%.
Goldman Sachs picked up 7% in NCDEX for $23.1 million from ICICI Bank in July last year.
The sources added that once the government gives clearance to FDI limit in commodity exchanges, the Reserve Bank might issue guidelines for allowing foreign investors to pick up stake in the country’s commodity exchanges.
In oil refining, the Petroleum Ministry has already moved the Cabinet for allowing 49% FDI in state-run Hindustan Petroleum’s Bhatinda refinery, in which steel tycoon L N Mittal plans to buy the stake.
The sources said the two notes by DIPP and Petroleum Ministry could be merged to seek overall Cabinet permission for raising FDI limit in PSU oil refineries, so that Mittal’s proposal could be cleared.
The DIPP note is also likely to clearly define FDI cap in areas like flying institutions and maintenance and repair services in the civil aviation sector, the sources said.
Currently, the FDI cap in the entire aviation sector is 49%, barring greenfield airports, where it is 100%. However, no specific mention is made for flying institutions and maintenance and repair services.
The Foreign Investment Promotion Board had recently refused to consider Mittal’s plan to pick up 49% stake in HPCL’s Bhatinda refinery, saying the present policy restricts FDI in PSU refineries to 26%.
FIPB has recommended that the proposal should be taken up once Cabinet gave its nod to raise FDI limit to 49% in PSU refineries, and not as a stand-alone case.
Mittal, through his UK-based subsidiary Mittal Investments, had sought FIPB clearance to invest Rs3,506 crore for 49% stake in the Rs17,983-crore refinery. The two companies have already signed a joint venture pact.