FIPB TO PROBE MATHER & PLATT
FDI
The government is planning to look into Mather
& Platt India, part of the Chhabria-controlled Jumbo Group,
as it is reported to be engaged in trading activities without
any specific approval.
Specific government approval is necessary
for such trading activities in companies where FDI is involved.
While FDI is allowed in trading, approval from the Foreign
Investment Promotion Board (FIPB) is necessary and areas like
retail trading are not open for FDI.
The foreign equity holding in Mather &
Platt now stands at 67.64% and the Jumbo Group is planning
to increase it by another 6.51%.
The decision to look into the entries of
Mather & Platt India was triggered by the company’s
proposal to hike its foreign equity stake.
Recently, a proposal was submitted to the
FIPB seeking permission to allow Mather & Platt Mauritius
to buy 37,263 shares of Mather & Platt India from Dandvati
Investment & Trading Company, a holding arm.
The department of industrial policy &
promotion then pointed out that Mather & Platt India was
engaged in trading activities without any specific approval.
The company is now only seeking regularisation
of these activities, which are not permissible under the FDI
policy, the department said.
The commerce department also supported this
view, according to sources. The company is engaged in the
supply of food processing and textile finishing machinery.
The department of industrial policy &
promotion was of the view that the proposal to hike foreign
equity in Mather & Platt should be rejected.
Sources said the view of the department of
commerce was that the proposal was contrary to the spirit
of the FDI policy.
It is understood that the FIPB secretariat
will initially seek information from Mather & Platt on
how it entered into trading activities without any specific
approval.
Further action will be based on the explanation
provided by the company. As of now, the proposal has been
put on hold for a couple of weeks.
No company with foreign equity holding can
engage in trading without specific approval. The FIPB restricts
such approvals to cash and carry wholesale trading or ex-warehouse
sales.
The FIPB’s decision to look into Mather
& Platt’s trading activities comes at a time when
a controversy is raging over the issue of permitting FDI in
retail trading.
While some lobbies feel that the entry of
foreign investment into trading will kill small shopkeepers,
others are of the view that large Indian investment in malls
has not led to the diversion of business away from small retailers.
The third view is that FDI can be permitted
in branded retail while preventing such investments in supermarket-type
operations.
