FDI in multi-brand retail, aviation, 4 PSU sell-offs okayed

The government today relaxed foreign direct investment (FDI) in aviation, multi-brand retail, power exchanges and broadcast services -- key economic reforms that have been stalled for months by political gridlock in New Delhi.

The government has decided to allow foreign airlines to buy upto 49% stake in local Indian carriers in a much-awaited policy move that provides a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding.

The move will help troubled companies like Kingfisher, Spicejet and Go Air. Gulf-based carriers like Emirates could be the first foreign airlines to enter the Indian aviation sector. (Are foreign airlines willing to invest in Indian carriers?)

The government has, however, left the option to invite multi-brand retail on the states. There is an opt out clause in the FDI in multi-brand retail, which has been the most contagious of the issues. According to the clause, "Retail sales outlets maybe set up in those states which have agreed or agree in the future to allow FDI in multi-brand retail under this policy. This is an enabling clause. This means that no FDI in retail will be allowed in any state unless the state explicitly agrees to come on board and agree to the policy."

(Why govt eased 30% outsourcing rule in single brand retail?) 

It has been proposed that retail sales outlets may be set up in those states which have agreed or agree in future to allow FDI in MBRT under this policy. The establishment of the retail sales outlets will be in compliance of applicable state laws/ regulations, such as the Shops and Establishments Act etc.

Also, the FDI cap on various streams of broadcast services has been raised to up to 74%.

In another important decision, the government approved the disinvestment of five Public Sector Units (PSUs), including Oil India (10%), Nalco (12.5%), Hindustan Copper (9.59%) and MMTC (9.3%).

The government aims to raise Rs 15,000 crore through share sales in state-run companies in the current fiscal year that ends in March 2013, but has been unable to raise any funds thus far because of weak market conditions.

India Inc welcomed the move with the FICCI terming it as a "big step". FICCI general secretary Rajiv Kumar said, "This is a big step. We welcome this move," adding, "We hope the Opposition will not target the move as it is good for the economy."

However, reacting to decision of the government, the Left said that the move would create further crisis in the country. CPM leader Gurudas Dasgupta said, "This will not stimulate the economy, instead it will have adverse affect on small traders." "Politically, the government is going down. The government under Prime Minister Manmohan Singh is responsible to the decline in the economy," he further said.

CPI leader D Raja called the move anti-national saying the party strongly opposed the move.