Jharkhand to project itself as auto component hub

Apex chamber FICCI has called for early enactment of a flexible and user-friendly Companies Act as part of its effort to make Indian industry more cost-competitive and boost the confidence of foreign investors.

Of the 3,000-odd Central government statutes, about 450 laws deal directly or indirectly with economic and commercial decision-making. FICCI has noted that there is a need to weed out redundant and outmoded laws, while simplifying the needed ones. Due to the vast number of compliance requirements from a variety of government departments; new projects and expansion plans - particularly Greenfield projects - are often delayed and face cost over-runs.

With as many as 38 mn pending cases, there is an urgent need to increase the number of courts and judges while rationalising the procedural hassles. The chamber has also noted that there is a need to evolve a mechanism to ensure that only merit-based appeals are preferred by the government.

Among other things it has suggested introduction of the concept of plea-bargaining in India. In the United States, 75% of the total convictions are secured through plea-bargaining. Introduction of a sunset clause in all legislations, referral of more cases to arbitration and other speedier dispute settlement mechanism to reduce the burden of courts, are among the other suggested changes.

A relaxation in foreign direct investment (FDI) norms for big ticket investments is in the offing. Big budget investment proposals in sectors where 100% FDI is allowed under the automatic route may not have to pass the Foreign Investment Promotion Board (FIPB) scrutiny even if they breach the Rs 600-crore (approx. US$ 133 mn) limit.

According to government sources, the FIPB has directed the Department of Industrial Policy and Promotion (DIPP) to review the requirement of such an approval by the Cabinet Committee on Economic Affairs (CCEA).

The RBI on its part has confirmed that investment by non-residents under the automatic route is subject to only sectoral cap and no monetary ceiling has been stipulated under FEMA. Currently, such cases have no precedent given that the investment limit clause contradicts the automatic route for the sector. This had delayed foreign firm Holcim's investment plan earlier this year since the cement major's proposal had to go through the FIPB approval process despite the fact that the cement sector comes under the automatic route. The change in FDI policy would streamline big ticket investment projects, making it easier to roll out investment plans instead of taking approvals from the FIPB.

Major beneficiaries would include, among others, steel giant Posco, which has announced big investment plans for the country, players in the auto sector and in the iron and steel sector. The delay in the clearance of such investments has been pointed out as a big negative compared to the fast-track procedures in China and other emerging markets by visiting CEOs of large multinationals.