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Thursday, 9 June 2016

Government clears air on FDI policy for private security agencies

NEW DELHI: Foreign investors in companies that provide armoured car services or train private security guards will have to comply with the 49 per cent FDI cap, the government has clarified, ending ambiguity over whether such firms could be considered logistics providers. A stringent framework for private security agencies, in line with the home ministry's definition of such entities, has been put in place in the annual FDI compendium published by the Department
of Industrial Policy & Promotion. "We have brought in clarity and simplicity to the policy since there was some confusion earlier in this matter. This is an assimilation of the knowledge of various legislations to guide the investor," a senior government official said. The consolidated FDI policy circular 2016 has defined the terms "private security agencies," "private security" and "armoured car service" as per the Private Security Agencies Regulation Act, 2005. Companies ferrying cash for banks were caught in a policy tangle, with the home ministry insisting that 100 per cent foreign direct investment could not be allowed to them if they provide armoured cars or private security guards. In such cases, the companies cannot classify themselves as logistics or any other business category, where 100 per cent FDI is allowed. While the circular doesn't categorically state whether cash logistics firms come under the PSAR Act, the official said that such decisions would be taken by the home ministry when the need arises. Security provided by a person, other than a public servant, to protect or guard any person or property, including provision of armoured car service, would qualify as private security, the policy says. The home ministry's stance has been reiterated in FDI policy since it deals with the sensitive issues of security of the country. "By bringing these definitions, the government has provided more clarity in the FDI policy. Companies cannot blame the policy for not specifying things clearly now," said Devraj Singh, a partner at consulting firm EY. During United Progressive Alliance's tenure, a government panel had recommended liberalising the FDI cap in private security agencies from 49 per cent to 100 per cent. The suggestion was opposed by the Bharatiya Janata Party. 

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