New Delhi, March 30 (PTI): The US has asked India to remove a rule in its new competition law that requires foreign companies to obtain government approval for mergers and acquisitions (M&As), including those outside the country.

In a report submitted to Congress, the US trade department said it had taken up the issue with the Indian government to change the new regulation governing M&As under the amended competition act. “The United States is working with industry, foreign governments and Indian companies and industry groups to persuade the government to promulgate regulations under the new law to correct the most problematic aspects of the M&A provisions,” the report said.

In September 2007, India introduced merger control amendments to its Competition Act. The M&A provisions, once notified, will require foreign companies, including those with limited access to the Indian markets, to seek approvals from the Competition Commission for M&As made anywhere in the world, even outside India and the company’s home country.

“If enacted, a broad swath of global mergers and acquisitions will be potentially caught up in this new law,” the report, prepared by the office of the US trade representative, said.

The report said the country suffered from a slow bureaucracy “with little or no fear of government action and a clogged court system where cases can linger for years”. Indian firms face few, if any, disincentives to engage in anti-competitive business practices, it said.

The report added that while most sectors of the Indian economy were partially open to foreign investment, the government continued to prohibit or severely restrict foreign direct investments in certain politically sensitive sectors, such as agriculture, retail trading, railways and real estate.

It said India’s stringent and non-transparent regulations and procedures governing local shareholding inhibited inward investment and increased risk to new entrants.