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Foreign Direct Investment in industrial parks to get waiver
Wednesday, January 30, 2008

RBI might have disappointed realty companies that were looking forward to cheaper home loans to revive growth, but the government is ready with a booster dose: exempting foreign direct investment (FDI) in industrial parks from conditionalities like minimum capitalisation and lock-in period of three years. Differences within the government over a proposal to this effect have been resolved and the Cabinet Committee on Economic Affairs (CCEA) is scheduled to take it up on Wednesday.

All the departments concerned have conveyed its support to the proposal which was put forward by the department of industrial policy & promotion (Dipp) last October, highly-placed government sources said. This would enable the CCEA to exempt industrial parks from the conditions specified for FDI in real estate under Press Note 2, they added. The proposal has been pending for three months due to differences of opinion within the government.

Apart from a minimum capitalisation of $10 million for subsidiaries of foreign companies and $5 million for joint ventures, Press Note 2 also specifies that FDI in real estate projects would be allowed only in the case of projects spread over 10 hectares in the case of serviced housing plots. In the case of construction projects, the minimum built-up area has been specified as 50,000 sq m. A three-year lock-in is also mandatory.

In the case of industrial parks, the condition for allowing 100% FDI through the automatic route is construction of at least 10 units out of which no one should occupy more than 50% of the allotted area. At least, 66% of the total area should be allocated for industrial activities like manufacturing, telecom, software, data processing, consultancy and other computer-related businesses. Power, gas and water supply would also be allowed in such industrial parks. Business and management consultancy, engineering, architectural and R&D activities in natural sciences is also allowed.

Apart from industrial parks, the agenda pending before the CCEA includes permission for FDI in commodity exchanges, credit information companies, and liberalisation of foreign investment in titanium mining, civil aviation and petroleum & natural gas. The Dipp has proposed that 49% FDI should be allowed in commodity exchanges and credit information companies, with FII investment capped at 24%. No single entity should hold more than 10% in these two sectors, the department has said.

In the case of civil aviation, the proposal is to allow 75% FDI in non-scheduled airlines, chartered carriers and cargo operations, apart from ground-handing services. NRI investment of 100% would be allowed in these segments through the automatic route. The Dipp has also proposed that 100% FDI should be allowed in the case of MROs, flight training institutes, technical training institutes and helicopter/seaplane services.




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