Press Note 1 (PN 1) on the way out?

THE government is planning to scrap Press Note 1, allowing foreign companies to invest in sectors where they already have a joint venture without obtaining a no objection certificate (NOC) from their current partner. The government appears to have veered round to the view that PN 1 is making MNCs bypass India to invest in China.

PN1 shields local firms by mandating that foreign allies must get their nod before investing in the same sector. It thus enables local companies to get the technology and financial resources to expand operations.

Scrapping PN-1 would allow foreign firms to invest without getting NOC from their JV partners. Getting NOC is a dampener for MNCs; their plans are often jettisoned on frivolous grounds.

Press Note 1 was formulated in 2005 to dilute an earlier government provision called Press Note 18, which stipulated that the foreign company had to furnish a NOC from an Indian partner if it planned to set up a wholly-owned subsidiary in an allied field. Press Note 1 has restricted the need for an NOC to the same activity only. In addition, joint ventures formed after January 2005 are not subject to Press Note 1.