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Indian industry resents relaxation of JV norms for MNCs

The Indian industry has voiced concern over the reported move by the industries ministry to relax norms restricting multinational corporations or MNCs from floating new ventures in areas where they already have an existing joint venture.

Industry captains said such a relaxation would ''kill the domestic entrepreneurs''.

''Such an option would harm the interests of the domestic partner in the alliance as the foreign partner would get an opportunity to force its Indian counterpart to sell out, with the threat of stopping technology transfer. The Indian partner may, therefore, be forced to terminate the alliance or continue to pay royalty without much benefit,'' industry sources, on condition of anonimity, said.

Under the existing policy, a multinational requires a no-objection certificate from an existing joint venture in case it wants to set up a wholly-owned subsidiary or a new joint venture for manufacturing the same product.

The proposed amendment entails a broad outline that specifies that only in cases where technology agreements are exclusive to a joint venture company, would the foreign partner require a NOC from the existing joint venture company.

''It is only natural that if the amendment is cleared, the MNC will cease to take interest by way of reducing gradually or stopping completely support for upgradation of technology to the existing venture.''

The primary objective of the new policy has been stated to be easier flow of foreign direct investment and a more competitive environment.

However, industry observers felt that even if the policy is not amended, a sizeable amount of FDI would continue to flow into the country, and there would be enough competition from other MNCs and foreign investors wanting to set up manufacturing facilities for the same product.

Moreover, under the present conditions, there is also no danger of any monopolistic situation since other MNCs and all other foreign competitors are free to come in and bring advanced technology for production of the same product in the interest of the consumer, they said.

The industry further expressed surprise over this ''all-out'' support being granted to MNCs by the government.

They further stated that Commerce Secretary P P Prabhu has also expressed reservations over the amendment.

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