In an interview to a leading newspaper, Union Commerce Minister Anand Sharma that the proposed changes in the definition of foreign ‘control and ownership’ would be applicable prospectively.
Applying the proposed change in definition is necessary to protect the interest of foreign companies that entered into joint-ventures, partnerships or invested in Indian companies based on the existing definition, the minister has reportedly said.
For FDI across all sectors, the finance ministry has finally decided to accept the definition of ‘control and ownership’ prescribed in the new Companies Bill, 2012.
If the new definition is approved, Indian-owned and controlled companies that have more than 51 per cent foreign shareholding can make downstream investments in sectors that have FDI caps, without the government’s approval.
However, In 2011, the cabinet decided that investments by Indian companies in which foreign ownership was more than 50 per cent would be treated as foreign investment for downstream investment purposes. This definition was similar to what the Department of Industrial Policy and Promotion (DIPP), under the commerce ministry, had suggested in a discussion paper in 2011.
It is expected Commerce, Industry and Textiles Minister Anand Sharma would soon discuss the issue with Finance Minister P Chidambaram.