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Central Govt allowed 100% FDI in oil PSUs with ‘in-principle’ nod for Strategic Divestment

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On July 29, 2021, Department for Promotion of Industry and Internal Trade (DPIIT) issued a press note stating that a new clause has been added to the FDI (Foreign Direct Investment) policy for oil and natural gas sector.

  • As per the clause, Central Government has allowed 100% FDI under the automatic route for oil refiners in case an ‘in-principle’ approval for strategic disinvestment of a Public Sector Undertaking (PSU) has been granted by it.

It should be noted that the government is privatizing Bharat Petroleum Corporation Ltd. (BPCL) and selling its entire 52.98% stake in the company. This clause will expand the scope for foreign investment in privatization.

Applicability of policy:

The policy is applicable to exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG (Liquified Natural Gas) Regasification infrastructure, market study and formulation and Petroleum refining in the private sector.


The decision regarding this new clause was taken by the Union Cabinet last week. Notably, Two out of the three companies that have put in an initial expression of interest (EoI) for buying out the government’s entire stake in BPCL are foreign entities viz. US-based private equity firms Apollo Global and I Squared Capital’s arm Think Gas.

Points to be noted:

i.The FDI limit in PSU-promoted oil refineries will continue at 49% (raised from 26%), a limit that was set in March 2008.

ii.Now, only Indian Oil Corporation (IOC) is the oil refining and marketing company under direct government control.

Recent Related News:

As per the data of the DPIIT, the United States (US) became the 2nd largest source of FDI into India during FY21 by replacing Mauritius.

About Department for Promotion of Industry and Internal Trade (DPIIT):

It was established in the year 1995 and was reconstituted in the year 2000 with the merger of the Department of Industrial Development. The department was earlier called Department of Industrial Policy & Promotion and was renamed as DPIIT in January, 2019.
Parent Ministry– Ministry of Commerce and Industry