Passage To India
Photo Credit :
With the central government readying a proposal to tackle national security concerns arising out of foreign direct investments (FDI), companies from countries that are seen as a threat to India could have a tough time doing business in India. Cabinet Secretary K.M. Chandrasekhar is expected to call for a meet of the Committee of Secretaries to iron out the final FDI policy in “sensitive sectors and areas” that addresses security concerns, but which also does not send a negative signal to investors.
Senior officials admitted that Chandrasekhar gave directions to a committee headed by Home Secretary Madhukar Gupta to work out a “middle-path” policy that addresses the concerns of the intelligence agencies as well as ministries such as the Ministry of External Affairs, which did not want umbrella laws such as a ‘National Security Exemption Act’ or country-specific restrictions on investments. After deliberations over the past few months, the new policy is expected to spell out sensitive sectors. Earlier, in 2006, the National Security Council (NSC) had identified a host of sectors as sensitive, including ports, roads, airports, telecom, petroleum refining and exploration, pharma and defence.
The new policy will also identify sensitive regions (such as border areas) where there is need for tighter scrutiny of investments. Importantly, the new policy would also contain the steps the government can take in the event of dubious investments “post establishment”. At present, agencies such as the Reserve Bank, Foreign Investment Promotion Board and Securities and Exchange Board of India screen FDI at the initial stage.
The concept of an umbrella act traces back to a confidential background note prepared by NSC more than two years ago that highlighted a host of instances that can pose a threat to national security. These included Orascom’s investment in Hutchison Telecom, Dubai Ports (through global mergers) as well as a slew of sectors where “foreign entities inimical to India would not be desirable”. As a fallout, an umbrella legislation — similar to those in the US, the UK and even Canada — was suggested.
While that new law has been ruled out, the lack of an umbrella policy to tackle FDI in sensitive areas meant that border projects deploying foreign nationals such as the 300-MW Kotli Bhel hydel project in Himachal Pradesh have been languishing for more than a year. Till such time as the policy is finalised, the government has taken a view that anything within 50 km of international borders would be treated as projects in “sensitive areas”.
However, an important issue that needs the government’s final approval is whether there should be an “upfront country-specific exclusion in a tender document” or whether India should pursue what the Ministry of Defence says “case-by-case security vetting of projects in sensitive areas”.
Added to this, as Deputy National Security Adviser Leela K. Ponappa pointed out in a recent meeting, “there should be separate project work visa” as “Chinese workers are entering India on business visas”. According to her, a foreign national should apply for work permit, and only then, should she apply for visa. This should be made applicable “to the projects being undertaken in the government sector as well as the private sector”, according to Ponappa.
(Businessworld Issue 29 July-04 Aug 2008)