New Delhi, Sep 14: The cabinet today decided to operationalise 51 per cent FDI in multi-brand retail but left it to the state governments to allow setting up of such stores.
The Cabinet headed by Prime Minister Manmohan Singh cleared the decision at a meeting this evening.
For single-brand retail, the Cabinet decided that any firm seeking waiver of the mandatory 30 per cent local sourcing norms would have to set up a manufacturing facility in the country.
In November last year, the government had approved 51 per cent FDI in multi-brand. This was, however, put on hold due to political opposition, including from UPA constituent Trinamool Congress.
The minister said since the implementation of the decision was put on hold, it had to go to the Cabinet again before going ahead with the decision.
In another major decision, the government today approved sale of its minority stakes in four public sector firms—
Hindustan Copper, Oil India, MMTC and Nalco—to raise up to Rs 15,000 crore.
The Cabinet Committee on Economic Affairs (CCEA) has, however, not taken any decision on disinvestment of Neyveli Lignite, that was also on the agenda.
The government has approved the proposal to sell 10 per cent stake in Oil India Ltd and another 9.59 per cent disinvestment in Hindustan Copper Ltd, sources said.
Further, the CCEA also cleared the proposal of 12.15 per cent stake sale of Nalco and 9.33 per cent in MMTC through Offer for Sale (OFS) route.
However, the 5 per cent stake sale of Neyveli Lignite was not taken up by the CCEA, sources added.
Finance Minister P Chidambaram had last month asked officials to expedite the process of disinvestment so that state-owned companies could hit stock markets in time and help the government achieve the target of Rs 30,000 crore in the current fiscal.
Although five months have passed in the current fiscal, the government has not been able to come out with a single public issue.
Raising adequate funds from disinvestment was necessary to keep in check the fiscal deficit which is facing pressure due to rising food, fuel and fertiliser subsidy bills.
The government earlier deferred the initial public offer (IPO) of Rashtriya Ispat Nigam Ltd (RINL) due to weak stock market conditions. The Rs 2,500-crore RINL issue was originally proposed to hit the markets in July.
Due to uncertain market conditions, the government in the last fiscal could raise only Rs 14,000 crore from disinvestment against the target of Rs 40,000 crore.
In another major decision, foreign airlines can now pick up 49 per cent stake in India's domestic carriers, a step that is expected to give a boost to cash-strapped aviation industry.
The Cabinet Committee on Economic Affairs today approved the proposal which would pave way for much-needed equity infusion into India's airlines passing through acute turbulence as most of them are in dire need of funds for operations.
“The cabinet today approved the proposal of allowing foreign airlines to pick upto 49 per cent stakes in Indian carrier. Though FDI of upto 49 per cent, 75 per cent and 100 per cent was there in aviation sector, foreign airlines were not allowed,” Civil Aviation Minister Ajit Singh told reporters after the meeting.
Current FDI norms allow foreign investors, not related to airline business, to directly or indirectly own an equity stake of up to 49 per cent in Indian carrier.
Allowing foreign airlines to pick up stakes in Indian carriers has been a long-pending demand of the aviation sector.
Most of the Indian carriers are suffering losses because of high taxes on jet fuel, rising airport fees, costlier loans, poor infrastructure and cut-throat competition. Except IndiGo, all airlines have posted losses in the financial year ending on March 31.
Kingfisher Airlines, which is burdened with a debt of over Rs 7,000 crore, has been in the forefront of pushing for permission to allow foreign airlines to invest in domestic carriers.
Though Kingfisher has been pushing for FDI to boost the sector, Jet Airways and IndiGo have expressed reservations saying allowing global players in would lead to cartelisation and takeovers of Indian carriers.
The opening of the sector to foreign airlines may, however, bring good news for passengers who would benefit from more competitive fares, better product and services and better international connectivity.
The Manmohan Singh government had initiated the process in January but key UPA constituent Trinamool Congress was opposed to it.
Sensing that FDI proposals may be approved by the government, Kalanidhi Maran owned no-frill carrier - SpiceJet, had recently held “preliminary discussions” with a Gulf-based airline for potential investment in the budget carrier.
Foreign carriers such as British Airways and Virgin Atlantic Airways Ltd have expressed interest in investing in Indian carriers.
