The government has decided to exclude sectors like agriculture, farming and allied industries and services from the purview of Press Note 1. Press Note 1 stipulates that an international company already in a joint venture in India requires a no-objection certificate from its domestic partner before entering the same line of business, either individually or in a separate joint venture.
Once the new rules are implemented, a foreign company would not require permission from its Indian partner to make fresh investments in India. This would also mean that companies in these sectors would not have to reapply to the Foreign Investment Promotion Board for approval to invest in the country, either.
Press Note 1 regulations are amended versions of the vintage Press Note 18 regulations, which required any foreign company, with any joint venture or investment in India, to procure a no-objection certificate from its Indian partner for further investments in India, irrespective of the area of business. Both press notes were intended to protect domestic joint venture partners from a conflict of interests.
Currently, sectors like information technology and venture capital investments are excluded from the Press Note 1 restrictions. Senior government officials said that the ongoing foreign direct investment policy review would work out the details of these changes.
According to the government?s plans, after excluding these sectors from the purview of Press Note 1, it would subsequently abolish this regulation altogether. ?We want to take a gradual step towards abolishing protection given to Indian companies. Most companies feel their competitive edge is dulled if their foreign partners enter the same line of
business. But Press Note 1 will be abolished eventually,? said a government official. Press Note 1 has been a bone of contention for a large number of overseas companies. Around 40 investment proposals have been in limbo since October 2006, as the foreign companies have not managed to get no-objection certificates from their Indian partners to make fresh investments in India.
The department of industrial policy & promotion is understood to be taking a closer look at Press Note 1 by studying hotly contested cases like those of Guardian Industries and Modi Glass, Takata Corporation and Abhishek Automobiles, as well as Bates Singapore Pvt Ltd and Rediffusion.
