India union finance ministry has asked the department of industrial policy and promotion to provide a clear definition of the world `control' in the foreign direct investment policy in order to be able to identify the owner of the firms with FDI investment.

The ministry is concerned over the use of quasi-equity instruments by foreign investors in order to exercise control over Indian businesses. The ministry is seeking a clear definition so that ownership of firms with FDI can be established easily.

An official of the ministry explained that shareholding of more than 50% equity in a company by a foreigner establishes foreign ownership but the word control is defined as the ability to appoint majority of directors and this is exploited by foreign investors through quasi-equity instruments.

The definition does not take into consideration other ways of taking control like lien over voting rights and equity purchase agreements by the parties. The ministry has been working to bring changes to the FDI policy to fill loopholes. The FDI policy was revealed in 2009 and is believed to have gaps allowing firms to exploit them and issue more than 50 per cent shares to foreign investors while disclosing less than 50 per cent holding in order to take advantage of being an Indian company.