Finance minister P Chidambaram told FE, The utility of Press Note 18 may be over. He said that there was a strong case for reviewing the utility and continued relevance of Press Note 18.
According to finance ministry officials, any decision on Press Note 18 will need to be taken only by the Union cabinet. They said apex industry associations including Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce (Ficci) were against withdrawal of the notification.
CII is of the view that genuine grievances of foreign investors may be discussed. Press Note 18 may be modified, but should not be scrapped as it serves a useful purpose, CII director general N Srinivasan had earlier told FE.
The notification has been invoked by several Indian companies in the past to block their foreign partners from setting up a new venture in a similar line of business through a 100% subsidiary. The Foreign Investment Promotion Board (FIPB), till 2002, had generally seen merit in the Indian partners contention.
Over the last two years though, FIPB has been taking a more liberal view on such objections raised by defunct Indian joint ventures. For instance, in cases like Graphite-Widia India Ltd and Baron-TCL, the board ruled in favour of the foreign company.
The officials said that in a liberalised environment, Press Note 18 placed several restrictions on foreign investors and in a way discouraged foreign direct investment (FDI) into the country. While the ministry was likely to do away with the need to approach FIPB for routine clearances like transfer of NRI stake, etc, no final view has been taken on Press Note 18.