Senior finance ministry officials told DNA Money that the FIPB has approved the proposal, but subject to the removal of the overall FDI cap in petroleum refining in the public sector.
However, tie-up with HPCL is subject to removal of FDI cap
NEW DELHI: With the Foreign Investment Promotion Board (FIPB) clearing Mittal Investments’ proposal to invest Rs 3,506 crore in Hindustan Petroleum Corporation Ltd’s (HPCL) Bhatinda refinery, Mittal Steel’s entry into India’s petroleum refinery sector has cleared the first hurdle.
Senior finance ministry officials told DNA Money that the FIPB has approved the proposal, but subject to the removal of the overall foreign direct investment (FDI) cap in petroleum refining in the public sector.
“FIPB has approved the proposal, subject to the decision that the cap should be revised,” said an official.
Under current norms, 100% FDI is permitted under the automatic route for private refining companies, but for public sector units, it’s permitted only up to 26%. This required Mittal Investment to take FIPB approval.
The decision on the removal of the cap rests with the Union cabinet, which would also take the final decision on the proposal.
HPCL is in the process of seeking cabinet approval for entering into a joint venture with Mittal Investment, the Singapore arm of Mittal Sarl.
Sources said that while approving the proposal, the cabinet could remove the overall cap or reject the removal of the cap and grant exemption to the Mittal proposal. “Refining may see removal of FDI cap outside the overall FDI review policy,” said an official.
The department of public enterprises has been looking at revising the policy for FDI in various sectors, with the aim of harmonising caps across sectors.
Besides the induction of a partner, HPCL required the approval of the Cabinet Committee on Economic Affairs (CCEA) approval for relaxation in the department of public enterprises norms.
Currently, there is a ceiling, amounting to 15% of the PSU’s net worth in one project, limited to Rs 1,000 crore, on financial joint ventures and wholly owned subsidiaries. There is also an overall ceiling of 30% of the net worth on such investment in all projects put together.
HPCL’s investment of Rs 3,363 crore breaches both the overall ceiling of 30% and the limit of Rs 1,000 crore in one project.
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