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FIPB core group to vet Coke waiver plea

Partha Ghosh

Coca-Cola's proposal seeking a waiver or extension of the stake divestment clause is likely to be referred to the core group of the Foreign Investment Promotion Board, which comprises five permanent member-secretaries.

Secretaries of the commerce, industry (department of industrial policy and promotion), finance and revenue, and external affairs ministries comprise the core group.

In the absence of a member - as in the case of the finance ministry where the secretary's post is yet to be filled up - the ministry can delegate the powers to a subordinate in order to complete the quorum.

The core group's views, sources said, will be sent for final approval to the cabinet committee on economic affairs.

In this process, the comments of the department of economic affairs in the finance ministry will be very important as the DEA has in the past rejected the case on the ground that entry-level conditions cannot be changed.

This view may not have been endorsed by other ministries. But Minister for Commerce and Industry Murasoli Maran, who has to mandatorily clear foreign direct investment cases based on the recommendations of the FIPB, has endorsed the DEA's previous stance.

If the core group recommends that the soft drinks major be allowed more time to come out with an initial public offer or a private placement, it will become a precedent for all other cases where a divestment clause is involved.

In recent times, such cases have been rejected by the government or the companies have been advised to approach the FIPB around the time the divestment has to be done.

In sectors such as petroleum and chemicals, when the foreign company floats a 100 per cent owned arm, it has to divest 25 per cent shareholding to resident shareholders within five years.

But there are several cases where the companies would not prefer to do so based on their losses or readiness to induct a local partner.

Like in the case of Coca-Cola, the FIPB had asked Sodexho Pass, the food coupon major, to seek approval for deferment of a mandatory divestment not months in advance but closer to the stipulated deadline for divestment.

The FIPB's decision on Sodexho, which made a fresh application recently, may also become a reference point in Coca-Cola's case, the sources said.

The core group may even seek the views of the law ministry in the matter, a top official said, since this is a unique case and could snowball into a controversy if cleared.

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