Govt restricts foreign tie-ups

NEW DELHI, DEC 29: The government has decided not to allow foreign collaborations through automatic route in areas where applicants have ...

NEW DELHI, DEC 29: The government has decided not to allow foreign collaborations through automatic route in areas where applicants have already got permission to operate joint ventures.

Modifying the guidelines pertaining to approval of foreign or technical collaborations under the automatic route, a communication of the industry ministry said automatic route for foreign direct investment (FDI) or collaborations would not be available to those who have or had any previous joint ventures in the same or allied field in India. The restrictions apply to technology transfer and trade agreement also.

In view of the new restrictions, those investing in technology would have to seek foreign investment promotion board (FIPB) approval for joint ventures or technology transfer agreements, including trade mark, the communication said.

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While seeking the approval, these companies would have to give the circumstances under which they find it necessary to set up a new joint venture or go in for a new technologytransfer.

The communication said the onus to justify approval for new ventures was on the investors and technology supplies. They would also have to satisfy FIPB that the new venture would not jeopardize interests of existing joint ventures or technology or trade market partner or other stake holders.

The FIPB and projects approval board (PAB) had the discretion to approve application for fresh proposals with or without conditions. They could also reject in toto duly recording reasons for the decision, it said.

The restriction would form part of the approval procedures of industrial policy and procedures in India, it said. Reacting to the guidelines, industry sources said it could mean that fresh ventures could be stopped if any Indian project partner objected to the new proposal.

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Stating that the foreign firms already having tie-ups would now be at the mercy of their Indian partners, they said it could also lead to "influencing" of government machinery to get the approval.

Citing an example, thesources said companies like Xerox, which have proposal to set up 100 per subsidiary in India, will now have to depend on Modi with whom they have a tie-up.