NSC for life-long tracking of FDI in sensitive sectors

Sourced from ET Now

In a move that could have a significant impact on foreign investors looking to enter India, the National Security Council (NSC) has recommended

stricter guidelines for foreign direct investment.

The NSC has suggested that foreign companies looking to invest in sensitive sectors such as telecom, shipping and defence and having exposure to countries like China, Bangladesh and Pakistan should be screened not just at the time of approval but during their entire period of operation in India.

This would impact companies like Telenor, which has operations in Pakistan and Bangladesh and currently has 49% stake in Unitech Wireless. Telenor is awaiting final clearance from the home ministry before it begins operations.

If the proposal is accepted, companies will be on the security agencies’ radar for as long as they operate in India. It is also a departure from current norms where foreign companies are screened by agencies only at the time of grant of approval.

The NSC has specifically outlined FDI in sectors such as telecommunications, oil & gas, hydrocarbon exploration, pharmaceutical and shipping, which are sensitive. The council has also said that FDI coming from locations such as Pakistan, China, Bangladesh, Hong Kong, Macau, North Korea and Taiwan must be scrutinised. It has further listed J&K, north-eastern states and places with 50 km of nuclear establishments as sensitive destinations, where any FDI must be thoroughly checked.

The guidelines, which suggest that the finance ministry should be the nodal point for implementing and monitoring the proposed security norms, has also recommended that permission should be sought from regulators such as RBI and Sebi for any mergers and acquisitions involving foreign companies.

The guidelines also mention that sectoral regulators being proposed for specific sectors will have to seek the opinion of security and intelligence agencies. The NSC has said existing companies having FDI should be required to take permission before beginning any new activity or investing in sensitive sectors.

The NSC has said the existing system is flawed and does not have a mechanism to examine funds coming into sectors and from countries identified as sensitive by the government. “The list under automatic route is continuously being expanded which allows them to escape even the modicum of checking procedure,” the NSC said in its report.

http://economictimes.indiatimes.com/News/Economy/Finance/NSC-for-life-long-tracking-of-FDI-in-sensitive-sectors/articleshow/4900422.cms