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Industry & Economy - Foreign Direct Investment
Investment panel moots automatic route

Our Bureau

New Delhi , July 9

The Investment Commission has suggested that the "automatic route" be permitted for all investments within the sector cap.

In its report submitted to the Government, the three-member Investment Commission headed by Mr Ratan Tata, has recommended the removal or reduction in the restrictions on sector caps and entry route on all sectors other those considered "strategic".

Suggestions

Besides pitching for labour flexibility, the Commission has suggested that contract labour be permitted in all areas.

It has also called for a level playing field in sectors with PSU dominance. For this purpose, it has suggested that an independent Central Regulatory Commission be established, headed by a Chief Commissioner appointed by the Prime Minister or the President, with independent regulators for each regulated sector.

Moreover, it has suggested that an empowered committee framework (as done for VAT implementation) be established for implementation of key policies that require Centre-State co-operation such as reforms in the power sector and labour law, and urban land reforms (including ULC Act).

It has suggested improving business environment by reducing the number of procedures and approvals, besides making all approvals time-bound and non-discretionary.

Other recommendations include creation of a special high-level fast track mechanism for priority sector projects, facilitating upgradation of urban infrastructure by having a directly elected mayor in key cities - as is the case with major cities in China and the US - and establishing a single-point contact at the Centre to facilitate high-value projects across Ministries and Departments.

The major impediments to investment identified by the Commission include investment restrictions or entry route barriers in several sectors of significant investment potential or investor interest, absence of long-term policies, non-implementation or reversal of policy, and breach of contract.

Besides the inflexible labour laws and absence of level playing field in sectors with PSU dominance, the Commission has highlighted the Centre-State divergence on related policies as a major impediment to investments.

The Commission has also said that priority sectors are not clearly defined or specified and that many agencies are engaged in similar activities relating to FDI.

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