FM gains consensus on definition of control in FDI policy

On Thursday, the finance minister P Chidambaram and the commerce minister Anand Sharma met and ironed out the differences related to conflicting definition in the foreign direct investment (FDI) regulation and proposed Companies Bill and Securities and Exchanges Board of India (Sebi) regulations, reports CNBC-TV18's Aakansha Sethi.

While as per the Companies Bill and the Sebi takeover code, the definition of control means the ability to appoint majority board members, and influence decisions and policies; the FDI regulation is restricted only to appointing majority board members and does not allow participation in decision making. The changes in FDI regulation will now allow foreign investors to not only appoint board members but also participate in the decision making process. Now how will it be decided that whether a company can influence decisions or not that is going to be a self certification by the company. The proposed changes in FDI policy will be presented to the cabinet shortly for consideration. In sectors such as retail, telecom companies like Vodafone and Walmart were stuck due to the conflicting definitions of the term 'control'. Vodafone had to face troubles during the take-over of Hutchinson Essar earlier due to confusion over definition of control. Now, the companies will be able to make downstream investments in sectors where there are no FDI caps.