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1. Higher overseas investment allowed in energy sector
The Reserve Bank of India has liberalized rules for overseas investments by Indian companies in energy and natural resources sectors such as oil, gas, coal and mineral ores.
"With a view to providing greater flexibility to Indian parties for investment abroad, it has been decided, in consultation with the Union Government, to allow Indian companies to invest in excess of 400 percent of their net worth, as on the date of the last audited balance sheet, in the energy and natural resources sectors such as oil, gas, coal and mineral ores. The investments in excess of 400 percent of the net worth shall be made only with the prior approval of the RBI," according to a notification issued by the RBI.
Under the new rules, ONGC Videsh and Oil India have been brought on par with the so called "navratna" companies. Earlier only navaratna public sector undertakings were allowed to invest in overseas unincorporated entities in the oil sector (that is, for exploration and drilling for oil and natural gas and the like), which are duly approved by the Central Government, without any limits, under the automatic route. This facility has now been extended to ONGC Videsh, the overseas arm of ONGC and Oil India, India's second state owned Exploration Company.
2. Infrastructure companies can bring home $ 100 million
In a major relaxation of overseas borrowing norms, the government has made it easier for domestic companies to raise external commercial borrowings (ECBs) and repatriate larger chunks of these funds to India. A company can now bring in up to $50 million worth of ECBs a year for spending in India, up from $20 million, while borrowers in the infrastructure sector have been permitted to bring home $100 million, according to the revised rules issued by the Finance Ministry.
The government has also relaxed the spread over the London Interbank Offered Rate (Libor) making it easier for companies, especially small & medium enterprises, to access the overseas debt market. The all - in cost ceilings have been raised to 200 basis points (bps) over the six-month Libor rate - up from 150 bps - for loans of three - to five - year duration and to 350 bps - from the earlier 250 bps - for a loan of more than five years.
The relaxation in the ECB rules implies that domestic companies would have greater access to the relatively cheaper overseas debt market. The move would also help bring in higher capital flows and enable infrastructure companies to broadbase their funding and finance projects better.
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