FOREIGN institutional investors (FII) will not be allowed to get a berth on the boards of commodity exchanges. Treading cautiously, the government has proposed that FIIs can pick up 24% stake in commodity exchanges but they should stay pure financial investors and not take up board representation which entails a say in the management. The foreign direct investment (FDI) ceiling for commodity exchanges would be 25% — short of the minimum stake required for veto power. Therefore, the overall foreign investment in commodity exchanges would be capped at 49%. A similar structure has been put in place by the government for foreign investment in stock exchanges. Apart from denying FIIs board slots, the government has also decided to keep another layer of safeguard by stating that no single foreign entity would be allowed to hold more than 10% stake in any commodity exchange. In addition, clearance by the Foreign Investment Promotion Board (FIPB) is being made mandatory for foreign investment in these exchanges. Earlier, there were discussions on putting FDI in commodity exchanges on the automatic route. The comprehensive FDI review proposed by the government, in the works since the beginning of this year, is finally ready and the draft, apart from laying down guidelines for foreign investment in commodity exchanges, proposes clearance for 100% NRI investment in ground handling, cargo airlines, and chartered air services provided by non-scheduled airlines. FDI up to 100% will be allowed in the case of helicopter services, flight training institutes and MROs. The caution in the case of commodity bourses is due to political sensitivity — talk about elections has not subsided till now — with officials not wanting to take any chances. Forward trading in wheat and some pulses was banned recently as the government was facing heat over inflation. The move is significant since foreign investors have stake in MCX and NCDEX. Goldman Sachs has 7% in NCDEX while Fidelity holds 9% in MCX. The FDI review also proposes to scrap the mandatory divestment norms stipulated for allowing 49% FDI in public sector companies in the petroleum sector. The department of industrial policy & promotion (Dipp) has submitted a note which is expected to be considered by the Cabinet Committee on Economic Affairs (CCEA) soon. If necessary, the review would be discussed by the Cabinet too. The review proposes a major opening up of the civil aviation sector, highly-placed government sources said. While FDI in scheduled airlines would be capped at 49%, charter companies and cargo airlines would be allowed to hold 74% FDI. The Dipp has consulted most government departments on the proposed changes in the FDI policy, the sources added. NRIs will be allowed to hold 100% stake in cargo airlines and charter operators. FDI up to 74% would be allowed in ground handling services, the sources said. In the case of maintenance, repair and overhaul (MRO), flight training institutes, technical training institutes, helicopter services and sea-plane services, 100% FDI would be allowed. Foreign investment in training institutes would be subject to approval from the directorate general of civil aviation (DGCA). Since pilots and cabin crew are licenced by the DGCA, approval from the organisation is considered a must. Civil aviation minister Praful Patel is backing the move to allow FDI in more sub-segments of the booming aviation sector.