DIPP's new 'Control' definition to benefit Wal-Mart

As the government is considering the Mayaram panel report that seeks too enhance FDI caps in a host of sectors, another proposed policy move is on the works.

The industry body The Department of Industrial Policy and Promotion (DIPP) proposal on stricter definition of control could also lead to a legal sanctity to Press Notes 2 and 3 of 2009. It will not only open up foreign investment avenues but could also lead to a reprieve for Wal-Mart's investments in Cedar, which is being investigated by enforcement directorate (ED), reports Rituparna Bhuyan. In February 2009, Press Notes 2 and 3 were made part of the foreign direct investment (FDI) policy. But that was never made part of the Foreign Exchange Management Act (FEMA) framework. Also read: FDI cap hike in key sectors likely to boost investment mood However, we now learn that in the cabinet note, which proposes stricter definition for control - the DIPP has also said that once that cabinet nod comes in the Reserve Bank of India (RBI) will have to notify press notes 2 and 3 right from this date of issuance that is February 2009. This implies that the Press Notes 2 and 3 will now get legal sanctity. Basically, through the Press Note 2 and 3, Indian owned and controlled companies with foreign investment will now be able to invest in any sector without having to worry about FDI restrictions. This was allowed as per the FDI policy, but because there was no FEMA notification, it was a policy grey area. Therefore, this cabinet approval will bring some kind of clarity on that. With regards to Wal-Mart, their investment into Cedar had invoked press notes 2 and 3, but since it was not part of the FEMA network and hence this investment was being investigated by enforcement directorate (ED). However, now with this clarity now experts believe that Wal-Mart’s investments into Cedar might get some kind of a reprieve.