Proposal May Be Included In Annual Review, Move To Benefit Small-Scale Sports Equipment Makers
THE government may allow foreign investment in sectors reserved for small-scale industries and asset management companies (AMCs) through the automatic route. The move is aimed at boosting sports equipment — which source mainly from SMEs — before the 2010 Commonwealth Games in Delhi. At present, FDI up to 100% is allowed in sectors reserved for SSIs while 49% FDI is allowed in asset management. The proposals may be included in the yearly FDI review.
Once the proposal is cleared, FDI in the segments could be brought in without delay as the parties concerned have to only inform RBI rather than getting approval from Foreign Investment Promotion Board (FIPB). “However, the automatic approvals would be subject to sectoral caps and other stipulations,” a source in the department of industrial policy & promotion (Dipp) said. At present, 79 items are reserved for the SSI sector.
The government is in the process of removing the 24% FDI cap on companies in the SSI sector. Last year, commerce & industry minister Kamal Nath had indicated removing the FDI ceiling in the SSI sector.
Presently, small-scale units with FDI exceeding 24% lose their SSI status. Once the proposal is approved, the government would allow the companies to retain their SSI status even if they raise foreign equity beyond 24%.
According to data release by the ministry of micro medium and small-scale sector, there are 12.8 million small & medium enterprises in the country, which produce goods worth $140 billion. The SSI units export goods worth $33 billion, which is one-third of the country’s exports.
In the case of asset management companies, the government feels that allowing automatic approval in such cases would lead to growth of the financial sector and increase investing environment. However, the FDI limit will continue to remain at 49% for investments into the sector. At present, companies like Goldman Sachs, JP Morgan Chase and Morgan Stanley are operating in the country.