Industry department has requested RBI to urgently notify the provisions of foreign investment policy for limited liability partnerships (LLPs) at the earliest, a move aimed at attracting more foreign investments.
"The provisions of this department's Press Note 1, issued on May 20, 2011, regarding review of FDI policy for LLPs have still not been notified by RBI. It is, therefore, requested that the policy may suitably be incorporated in foreign exchange management regulations, and the relevant schedules thereof urgently," Department of Industrial Policy and Promotion (DIPP) said in a letter to the central bank.
LLP is a business structure that is a hybrid of a partnership company and body corporate.
The government had, in 2011, allowed FDI in LLPs in sectors where 100% foreign direct investment is permitted under the automatic route, like in mining, power and airports. However, foreign investment can take place in LLPs only after government approval.
As per the norms, LLPs with FDI will not be allowed to operate in agricultural or plantation activity, print media or real estate business. Also they cannot make any downstream investments.
The FDI policy further says that foreign institutional investors and foreign venture capital investors are not permitted to invest in LLPs.
The government has been taking several steps to increase foreign investment in the country. Recently, it further liberalised the investment norms in host of sectors like commodity exchanges, single brand retail trading and defence production.