Opting for big-bang reforms, the government today allowed politically-risky 51 per cent FDI in multi-brand retail, 49 per cent investment by foreign airlines in aviation sector and sale of equity in four PSUs.

Battling perceptions of policy paralysis, the government announced the surprise decisions after meetings of the Union Cabinet as well as the Cabinet Committee on Economic Affairs (CCEA), prompting angry reactions from its key ally TMC as well as BJP and Left parties.

The slew of reforms decided upon include raising FDI cap in broadcasting from 49 per cent to 74 per cent and allowing foreign investment in power exchanges.

51% FDI in Multi-Brand Retail Approved

The Cabinet headed by Prime Minister Manmohan Singh cleared the decision  to operationalise 51 per cent FDI in multi-brand retail.

After considering various aspects and discussions with various stakeholders and states, it has been decided to go ahead with the decision to allow 51 per cent FDI in multi-brand retail, Commerce and Industry Minister Anand Sharma told reporters after the Cabinet meeting chaired by Prime Minister Manmohan Singh.

For multi-brand retailing, a minimum investment of USD 100 million has been fixed, half of which necessarily has to be in creating storage and warehousing facilities in rural areas.

Front end retail stores would be allowed to be set up only in cities with a minimum of one million population. However, this norm has been diluted for hilly states which have been authorised to decide on criteria for choosing big cities.

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 notification for implementation of the decision is expected by the end of this month.

The decision paves way for global retail giants WalMart, Carrefour and Tesco to open retail stores in India under their own brands.

At present WalMart has a 50:50 cash and carry joint venture with Bharti Group, while Carrefour runs wholesale stores. Tesco, on the other hand has a tie-up with the Tata group and supports the Indian firm in the running of Star Bazaar chain of retail outlets.

For single brand, 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, the minister added.

This will help, in particular, foreign watch makers and textile manufacturers who want to enter India on their own, he added.

Swedish retailer IKEA, which planned to invest Rs 10,500 crore in India, had sought relaxations in clauses related to the 30 per cent sourcing norms from small and medium units.

Foreign Airlines Can Own 49% Stake in Indian Carriers

In a move aimed at boosting the cash-strapped aviation sector, the government today decided to allow foreign airlines to pick stakes up to 49 per cent in private Indian carriers, which was immediately welcomed by the industry.

The decision of Cabinet Committee on Economic Affairs to permit foreign airlines to invest in scheduled and non-scheduled air transport services would pave way for much-needed equity infusion into Indian carriers which are in dire need of funds for operations.

"Higher foreign investment inflows are necessary at the present juncture in order to strengthen the sector," a government statement said.

Briefing mediapersons on the CCEA decision, Commerce Minister Anand Sharma said the existing policy in aviation sector allowed FDI upto 49 per cent and it was allowed for the non-scheduled operator but not for scheduled operators.

"The government has now permitted foreign airlines to invest, under the government approval route, in the capital of Indian companies operating scheduled and non-scheduled air transport services, upto the limit of 49 per cent of their paid up capital," he said, adding strategic investors will come in when they have stake.

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.

A scheduled operator's permit can be granted only to a company that is registered and has its principal place of business in India with its Chairman and at least two-third of directors who are Indians.

Substantial ownership and effective control should be vested with Indian nationals.

Welcoming the decision a Kingfisher spokesperson said, "Kingfisher will now be able to re-engage with prospective airline investors in a more meaningful manner and move towards re-capitalisation and ramp up of operations."

While welcoming the decision a Jet Airways spokesperson said, "We welcome any policy initiated by the government."

If a company hires foreign nationals, as a result of such investment, he would have to get the security clearance before his deployment. Also clearance would be required for the equipment, which are imported in India, by the officials of Ministry of Civil Aviation.

Civil Aviation Minister Ajit Singh termed the move as an step that would allow Indian carriers to grow in world market.

"Though FDI of up to 49 per cent, 75 per cent and 100 per cent were there in cargo handling, business aviation and other sectors, but foreign airlines were not allowed in air transport services," Singh said, adding now DGCA has to be brought in and also plane acquiring policy has to be changed.

The opening of the sector to foreign airlines may bring good news for passengers who would benefit from more competitive fares, better product and services and better international connectivity.

FDI Cap Raised by upto 74% in Broadcast Services 

In a major decision to liberalise the broadcast sector, the government today decided to raise FDI cap to 74 per cent in various services of the sector, except the TV news channels and FM radio where the cap of 26 per cent will apply.

The decision of the Cabinet Committee on Economic Affairs (CCEA) will apply to broadcast carriage services providers, including Direct-to-Home, Head-end in the Sky (HITS), Multi-Service Operators (MSOs) and cable TV to bring about uniformity.

Till now, 49 per cent FDI was allowed in cable TV and DTH while it is 74 per cent in HITS.

HITS is a satellite multiplex service that provides TV channels for cable operations.

Among other segments, 74 per cent FDI was allowed in Mobile TV, which is an area of future growth.

Briefing mediapersons after the meeting, Commerce Minister Anand Sharma said of the 74 per cent, 49 per cent will be through automatic route while the rest will be allowed through government route, implying Foreign Investment Promotion Board (FIPB) clearance.

However, for TV news channels, current affairs, FM radio and content providers, the FDI limit will stay at 26 per cent.

India is estimated to have about 106 million households with cable and satellite TVs in India, of which 26 million use DTH and 80 million get feed from the cable network.

Govt Clears Stake Sale in 4 PSUs, to Raise Rs 15,000 Crore

Giving a push to its ambitious disinvestment programme, the government today decided to sell its stake in four PSUs -- Hindustan Copper, Oil India, MMTC and Nalco -- which may fetch around Rs 15,000 crore.

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 (HCL), an official statement 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.

The government currently holds 78.43 per cent stake in Oil India. "After this disinvestment, the government's shareholding in the company would come down to 68.43 per cent," the statement added. The paid-up capital of the company as on March 2012 stood at Rs 601 crore.

Further, post disinvestment government stake in HCL would come down to 90 per cent, from 99.59 per cent at present. The company's paid up capital stands at Rs 463 crore.

As far as the stake sale in NALCO is concerned, it would bring down the government equity in the company to 75 per cent, from 87.15 per cent at present. The equity capital of the company stands at Rs 1,289 crore.

As regards commodity trading firm MMTC, the stake sale would bring down government shareholding to 90 per cent, from 99.33 per cent. It's paid up capital stands at Rs 100 crore.

However, the 5 per cent stake sale of Neyveli Lignite and another 10 per cent IPO of RITES was not taken up by the CCEA.

In today's trade, shares of MMTC were down by 0.17 per cent at Rs 777.90, NALCO was up by 1.50 per cent at Rs 54.10.

Oil India shares were up 0.94 per cent at Rs 486.35 and HCL closed at Rs 269.35, up 0.62 per cent on the BSE.

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.

Raising adequate funds from disinvestments was necessary to keep in check the fiscal deficit which is facing pressure due to rising food, fuel and fertiliser subsidy bills.

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.

49% FDI in Power Trading Exchanges Approved

The Cabinet Committee on Economic Affairs (CCEA) has decided to permit foreign investment up to 49 per cent in Power Trading Exchanges in compliance with SEBI Regulations; Central Electricity Regulatory Commission (Power Market) Regulations, 2010, Commerce and Industry Minister Anand Sharma said after the Cabinet meeting here.

Of this, total Foreign Direct Investment (FDI) should not exceed 26 per cent while investment by Foreign Institutional Investors (FII) should be restricted to 23 per cent of the paid-up capital.

Currently, there are two exchanges in the country namely Power Exchange India and Indian Energy Exchange.

"FII investments would be permitted under the automatic route and FDI would be permitted under the government approval route," he said.

This is subject to the conditions that FII purchases shall be restricted to secondary market only, and no non-resident investor or entity, including persons acting in concert, holding more than 5 per cent of the equity in these companies, he added.

The approval is expected to strengthen the power trading exchanges and to enhance the availability of power, as well as improve its distribution for inclusive development.

Introduction of global best practices, concomitant with the induction of FDI, is expected to lead to higher service standards in power trading exchanges, he said.

As per existing policy, he said, FDI up to 100 per cent, under the automatic route, is permitted in the power sector (except atomic energy).

The existing policy includes generation, transmission and distribution of electricity as well as power trading, subject to the provisions of the Electricity Act, 2003, Sharma added.

He said, however, there is no specific dispensation under FDI policy for power trading exchanges.

The existing FDI policy permits foreign investment, up to 49 per cent (FDI & FII) in infrastructure companies in securities markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations.

Of this, the FDI limit is 26 per cent while FII investment is limited to 23 per cent of the paid-up capital.

While FII investment is on the automatic route, FDI is allowed under the government approval route. Foreign investment in commodity exchanges is also allowed on the same lines.

Power trading is the purchase of electricity for resale thereof. A power trading exchange provides an organised platform for fair, neutral, efficient and robust price discovery; extensive and quick price dissemination; and price risk management for the generators, distributors, traders, consumers and other stakeholders in the power sector.

The decisions come on top of yesterday's hike in diesel prices and capping of supply of subsidised LPG to cut oil subsidies which has already invited protests from allies and opposition.

"Let us not confuse consensus with unanimity. For unanimity we will have to wait in eternity. This (today's decision) has consensus," Commerce Minister Anand Sharma told a press conference here clearly conveying the message that the Centre has decided to go ahead with the reforms despite opposition.

Sharma said they respected West Bengal Chief Minister Mamata Banerjee's position on multi-brand retailing. "It is her prerogative to implement or not. It is equally our prerogative to implement in the other states (which are keen on it)".

Replying to questions, Sharma said the 10-month period between November last year when the government decided to first allow FDI multi-brand retailing was used for extensive consultations with all stakeholders.

"There was never a decision to rollback the decision. It was only suspended because of reservations from some states. This is an enabling step. States which want to implement are free to implement, those who do not want need not," he said.

He said the Department of Industrial Policy and Promotion would come out with notifications detailing rules for all the decisions without any delay.

Eights states including Delhi, Jammu and Kashmir, Assam, Maharashtra, Rajasthan, Uttrakhand, Haryana and Manipur have supported FDI in multi-brand retailing while Bihar, Karnataka, Kerala, Madhya Pradesh, Tripura and Odisha have expressed reservations.