Govt finalises risk management approach for FDI inflows

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Following exhaustive inter-ministerial consultations, the government has finalized a new approach to manage security concerns with regard to inflows via foreign direct investments. The new approach aims for surveillance of all investments while trying to avoid the need for umbrella security legislation, reports CNBC-TV18's Siddharth Zarabi.

Sources say the government has finalised a risk management approach for FDI inflows, which will addresssector specific concerns. The risk management approach is mindful of investment needs.

A full disclosure of all details will be mandatory at the application stage. The Department of Industrial Policy and Promotion (DIPP) and the Ministry of Home Affairs (MHA) will have to prepare a new format for FDI applications.

There will be mandatory post investment surveillance of FDI through the automatic route. The Law Ministry is likely to draft a new legislation for surveillance, which will empower the government to act in national interest.

Press Note 3 2009 is to be reviewed by the DIPP, Ministry of Corporate Affairs, Law Ministry, and the Ministry of Finance. This will include a safeguard clause. The review will address issues of ownership and control by foreign entities.

Prior MHA security nod would to be mandatory for all approvals. It would review and recommend a list of new sensitive sectors. Security rejected cases can be reviewed on request. While issues related to imported equipment security are to be dealt with separately.