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Shri Kamal Nath, Union Minister of Commerce & Industry, has announced withdrawal of Press Note 18 on future joint ventures (JVs) as well as substantial modifications in its applicability to current joint ventures. Outlining details of the changes after the Prime Minister Dr. Manmohan Singh had gave an indication of the government’s intention to withdraw Press Note 18 on future JVs at the Partnership Summit of the Confederation of Indian Industries (CII) in Kolkata today, Shri Kamal Nath said that the Press Note 18 would not apply to any joint ventures entered into after today and future joint ventures were advised to include a conflict of interest clause in their agreements in order to protect interests of the parties concerned. Shri Kamal Nath said that the decision had been taken after wide consultations with industry associations and all sections of the domestic industry.
“A perception has grown that Press Note 18 is standing in the way of foreign direct investment (FDI). I do not entirely agree with this view. However, since the government wishes to make crystal clear its intention of facilitating FDI, particularly to increase economic activities and generate more employment opportunities, we wish to remove even the perceived obstacles and therefore, it has been decided to substantially modify the applicability of Press Note 18”, Shri Kamal Nath said.
Even among the old or existing joint ventures, the following three categories are excluded from the purview of Press Note 18:
1. Sick or defunct joint ventures;
2. Joint ventures in which either of the partners has less than 3% stake; and
3. Venture capital funds registered with the Securities & Exchange Board of India (SEBI).
Even among the existing joint ventures which do not come under these categories, and, therefore, Press Note 18 applies, it will apply in modified form. Firstly, it will apply only for the same field and not similar or allied fields. And secondly, the onus of proof to prove whether the new joint ventures would or would not adversely effect the existing joint ventures would be equally with the foreign and domestic partners. (Uptil now, it was only on the foreign partner).
What is Press Note 18?
According to Press Note 18 of 1998, foreign financial/technical collaborators with previous/existing joint ventures/technology transfer/trade-mark agreements in India were required to obtain prior government approval before setting up new ventures in the same or allied field, justifying that the new venture would not in any manner jeopardise the interest of the existing joint venture partner. Press Note 18, therefore, prohibited access to automatic route and such cases required prior approval of the government.
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