FDI policy: Mayaram committee pitches for complete overhaul

The government took the first step towards hiking sectoral caps in foreign direct investment in major sectors like telecom and defence with a committee headed by secretary, department of economic affairs, Arvind Mayaram, submitting its report to the finance minister outlining the road map.

The report, which is in the form of a discussion paper was submitted by Mayaram late on Monday evening, has recommended hiking FDI caps in various sectors, including in defence to 49% from 26% and in telecommunications to 100% from 74%. The recommendations also state that the hike in caps should come with stringent security riders to allay the concerns of the defence and the home ministry.

Broadly the panel has suggested that wherever the caps are at 26% be raised to 49%, wherever it is at 51% it be raised to 74% and wherever 74% it should be made 100%.

While a hike in the cap for FDI in defence to 49% may be welcomed by domestic companies like Mahindra which have evinced interest in this space, hiking the same to 100% in telecom would be greatly welcomed by the mobile operators. In particular it would provide room to Bharti Airtel, which is looking for ways to ease its debt burden. Global companies like Vodafone and Telenor, which currently operate in India with minority Indian partners may then prefer to go solo.

Sources said that finance minister P Chidambaram will meet commerce minister Anand Sharma once the latter returns from his trip to the United Kingdom on June 26. The ministers will then meet the Prime Minister Manmohan Singh before any decision is taken on lifting or raising sectoral caps. The policy decision announcing recommended sectoral caps along with new definition for foreign direct investment (FDI) and foreign institutional investment (FII) is likely to be announced by first week of July, a senior government official said.

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