The Cabinet Committee on Economic Affairs (CCEA) has exempted PepsiCo from the divestment clause, paving a way for the infusion of $50-million (about Rs. 250 crore) foreign direct investment (FDI) from Pepsico Holdings to its Indian operations. The Union Government has already allowed 100% foreign direct investment (FDI) in the food processing sector.

Addressing reports, Union Science and Technology Minister, Kapil Sibal said, "When Pepsico India Holding first invested in India, guidelines for investment were different. The guidelines have changed now."

PepsiCo entered India in 1997 when the foreign direct investment limit was 51 per cent in the food processing sector. So the company was obliged to divest the 49% of its local unit in favor of Indian partners within the first five years of operations. Pepsi demanded waivers following the changes in guide lines and rules for the food processing industry by the government.

The Foreign Investment Promotion Board (FIPB) considered the proposal of Pepsi for the third time and gave its nod for investment of $50 million in its Indian operations. The company holds 100 per cent stake in Aradhana Soft Drinks Company and the deadline regarding divesting stake has already expired in 2007.

It is recalled that Coca-Cola also demanded such waiver in 2002 but the government turned down its request.