02 January,2009 04:15 PM IST | | PTI
The Central government on Friday cleared the way for $50 million foreign direct investment from Pepsico, by exempting the beverages major from fulfilling a requirement to divest 49 per cent stake in bottling firms to Indian companies.
The decision was taken by the Cabinet Committee on Economic Affairs since guidelines for food processing sector now allows 100 per cent FDI, Science and Technology Minister Kapil Sibal told reporters after the meeting.
"When Pepsico India Holding Private Ltd first invested in India, guidelines for investment were different. The guidelines have changed now," he said.
As such, CCEA decided to delete the previous requirement, a decision which would result in FDI inflow of $50 million into the country, he said.
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A Pepsico India Holding spokesperson refused to comment on the decision on the ground, saying he wasn't aware of the details of the CCEA decision. When Pepsico Holding came to India way back in 1997, it was asked to mandatorily disinvest 49 per cent of equity in its Indian bottling arms to domestic companies in five years.
The same condition was applied to Coca Cola India as well. Coca Cola complied with the decision in 2002, although it repeatedly requested for waiver of the condition.
When asked whether Coca Cola would also be given this kind of exemption, Sibal said CCEA decided in the case of Pepsico on Friday.
"When the decision on Coca Cola is taken, you will be informed," he told reporters.
Pepsico's case for waiver from the divestment requirement was heard by FIPB for the third time in October last year. It had subsequently referred the case to the CCEA.
Pepsico India Holding has 100 per cent stake in Aradhana Soft Drinks Company and the deadline for divesting stake expired in 2007.
The decision would enable Pepsico to bring in much-needed FDI into the country, as the economy faces a dearth of capital.
The country's Balance of Payments, which measures the gap between money coming into and going out of the country, turned negative for the first time in three years in the second quarter of this fiscal.
