PM
SCRAPS PRESS NOTE 18
The Union government
has scrapped the contentious Press Note 18 pertaining to foreign
financial or technical collaboration under the automatic approval
route.
Prime Minister
Manmohan Singh announced this while delivering the inaugural
address at the three-day CII Partnership Summit in Kolkata.
"We will do
away with the restrictive provisions of Press Note 18 for
all future joint ventures with foreign partners . In the new
dispensation, new joint ventures and collaborations will have
to be based on the free will of partners without any government
interference, while existing joint ventures will continue
to be protected by a few provisions of Press Note 18,"
Mr Singh said.
Apart from freeing
new joint ventures from Press Note 18, the government has
also made significant liberalisation in the FDI regime with
retrospective effect.
Even in the case
of existing joint ventures (JVs) which attract Press Note
18 provisions, venture capital funds have been exempted from
the requirement of having to obtain a no-objection certificate
from local partners for new investments. Similar freedom has
been extended to sick companies and JVs where both warring
partners do not hold at least 3% stake.
The need for consent
from the existing partners will apply in the case of JVs formed
in the past only if the proposed sector of investment is the
'same' as the existing JV, according to the commerce department.
Changes with retrospective
effect have been made to ensure smooth flow of investments,
according to commerce and industry ministry officials.
The ministry today
said that Indian companies as well as foreign partners should
safeguard their interests in JVs through legal provisions
to tackle conflict of interest. Such provisions should take
care of issues arising out of the decision of one JV partner
to launch another JV or a fully-owned subsidiary in the same
field of activity.
Press Note 18,
which was governing such conflicts till now, stands scrapped
with immediate effect. It has been superseded by Press Note
1 of '04 which will guide approvals for JVs, technical collaborations
for companies which already have a tie-up in India.
In case of a dispute
pertaining to an existing collaboration, the domestic partner
will shoulder the burden of proving that the proposed venture
will harm the existing JV. Under such circumstances, the foreign
partner will have to prove that there will be no harm to the
existing venture before getting clearance from the Foreign
Investment Promotion Board (FIPB).
