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SAARC region -- Investment cap raised for Indian cos

Shaji Vikraman

K.R. Srivats

NEW DELHI, Aug. 10

THE Government has increased the overseas direct investment limit for Indian companies in the SAARC region through the automatic approval route, from $50 millions to $75 millions.

Indian companies can now set up either joint ventures or fully-owned subsidiaries in the SAARC region -- Nepal, Bhutan, Bangladesh, Sri Lanka and Myanmar -- by investing up to $75 millions and obtain automatic approval.

For rupee investment in Nepal and Bhutan, the investment ceiling has now been raised from Rs. 120 crores to Rs. 350 crores, according to the revised guidelines for Indian direct investment abroad issued by the Finance Ministry.

For making investments up to this revised limit, Indian companies need not take the prior approval of the Reserve Bank of India. Within the overall limit of $75 millions, Indian companies can invest in equity or provide guarantees on the automatic approv al route on more than one occasion and in more than one joint venture or fully-owned subsidiary abroad, the guidelines said.

This investment facility, which excludes one country in this region -- Pakistan, will be available for Indian companies only once in a block of three calendar years, including the one in which the investment is made.

According to Government officials, since the SAARC countries are accorded preferential treatment for investment purposes by the Government of India, the investment ceiling had to be raised from $50 millions through the automatic approval route, which is now the ceiling for all companies in any sector. The ceiling was increased from $15 millions to $50 millions in this year's Union Budget.

However, companies in the information technology, pharma and bio-technology sectors will be eligible to utilise the automatic approval route up to an aggregate limit of $100 millions. Policy changes in this regard were carried out earlier this year, when companies in the IT sector lobbied hard for a liberal overseas investment policy.

In the past, Indian companies taking advantage of this special dispensation for SAARC countries had channelised investments in Sri Lanka and Nepal but over the last few years, it has been at a low ebb.