Comexes given 6 more months for divesting foreign equity

The government today gave a second extension up to March 31, 2010 to commodity exchanges to fall in line with the foreign investment ceiling of 5 per cent for an individual investor within the cap of 49 per cent. The Department of Industrial Policy and Promotion (DIPP), however, has said this would be the "last opportunity" for complying with August 19, 2008 guidelines which required the commodity exchanges to bring the overall foreign investment ceiling to 49 per cent, within which the portfolio investment would be limited to 23 per cent and FDI to 26 per cent. Over and above this, no foreign investor/entity was to hold more than 5 per cent of equity in these companies. "Difficulties have been brought to the notice of the government in complying with the provisions...Within the stipulated time frame," the DIPP said in its latest Press Note 7 of 2009. It said non-compliance would be a violation of the Foreign Exchange Management Act, 1999. The department had originally given a deadline of June 30 this year which was later extended to September 30. The country's leading commodity exchange NCDEX is in the process of complying with DIPP guidelines. Global investors holding more than five per cent - Intercontinental Exchange and Goldman Sachs - have clinched a deal with Shree Renuka Sugar for divesting their NCDEX stake beyond 5 per cent. All commodity exchanges will have to inform the DIPP, Department of Consumer Affairs, Foreign Investment Promotion Board, Forward Market Commission and Sebi of their foreign investment composition.