FDI: Amendment in FEMA Rules by RBI needs to be passed by Parliament

New Delhi, November 24, 2012: “The FDI notification can be valid and effective only if the amendments made by Reserve Bank of India in rules and regulations of Foreign Exchange Management Act, 1999(FEMA) are approved by "each house" of the Parliament which is an inherited provision in Section 48 of the FEMA Act. The said provision is explicit and do not have ambiguity or discretion”, said Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT) which is spearheading a national movement against FDI in Retail. The government is terming it merely as an executive order which does not need approval of the Parliament is factually a distortion of facts, added Khandelwal.

Looking at the dubious role of the government on this issue, the CAIT in a communication sent today to Parliamentary Party Leaders of all political parties has drawn their attention to the provision of Section 48 under which such amendments must be passed within 30 days from the date of its introduction in the Parliament. As per parliamentary procedure any such amendment will go to Committee on Subordinate legislation of each house which will scrutinise the same and will submit its report to Presiding Officer of their respective house and then house will decide the issue. The House may agree, disagree or modify the amendment and will effect only in such modified form or be of no effect. Therefore, as of now the notification is not more than a paper of FDI policy which do not have any legal sanctity.

Questioning the intent of the government to engage in some sort of delaying tactics to get the time period of 30 days over without placing the issue before each house of Parliament, the CAIT has advised different party leaders to give due and needed concentration on the movement of the said amendment in order to ensure that within stipulated period, the amendments must be discussed in each house of the Parliament.

Calling the notification as an enabling policy for the states to decide whether to implement the same or not by Commerce Minister Anand Sharma, Khandelwal said it is misleading since the GATS agreement under WTO and 82 Bilateral Investment on Promotion Treaties signed by the government with various nations binds the government to provide "national treatment" to foreign investor which implies that no discrimination can be made between a domestic company and the foreign investor. Therefore, the States have no choice, said Khandelwal.