PN 18 likely to be diluted for future joint ventures

New Delhi, Nov 28 | Updated: Nov 29 2004, 05:38am hrs
Government is finally set to clear the air on controversial Press Note 18, 1998, which requires foreign companies to obtain the consent of their Indian partners before venturing on their own in the same line of business or an allied activity.

According to government officials, a clarification can be expected shortly. They said Press Note 18 may apply to fresh joint ventures in a significantly diluted form. The Indian and foreign partners may incorporate commercial terms in the shareholders agreement itself, thus sparing the government of any role in case a spat arises later.

Commerce and industry minister Kamal Nath had last week announced that the government would adopt a differential approach in revising Press Note 18 for existing and fresh JVs.

Officials said that in the early-October meeting of the committee of secretaries, the finance ministry had pushed for a dilution of many of Press Note 18s restrictive features. The Planning Commissions menu of options had included scrapping it altogether.

The most likely decision, officials said, could be along the following lines: in JVs that have expired, for instance, if the Indian partner is under liquidation, Press Note 18 cannot be invoked. In such cases, the overseas partner would not be required to obtain a no-objection certificate (NOC) from its Indian partner and could go ahead with its new venture in the same or allied business.

In JVs that are functional, Press Note 18 would continue to be operative. In such cases, the foreign partners may be allowed to go in for fresh ventures in allied fields, but not in the same field. The government may also consider specifying a sunset clause by which time the Indian partner would absorb the foreign technology or arrive at an amicable solution with its overseas partner.

The CoS had not decided for how long the Press Note 18 should be applicable for such JVs. The officials said, a 2-3 year period may be provided to the two partners to sort out issues, if any, between themselves. After the specified period, the foreign partner would be free to venture alone. High-pitched domestic industry lobbying and opposition from the Left parties was, however, likely to scuttle any moves to do away with Press Note 18 for functional JVs, the officials noted.