Review
of Foreign Direct Investment on various sectors
Department of Industrial Policy and Promotion has reviewed
Foreign Direct Investment (FDI) policy on various sectors and specified
amendments to same vide its Press Note No. 12 (2015 Series).
Glimpse of the said amendment are listed below:
1. Definition of term ‘Manufacture’ is
added in FDI Policy which is as follows:
“Manufacture”
with its grammatical variations, means a change in a non- living physical
object or article or thing- (a) resulting in transformation of the object or
article or thing into a new and distinct object or article or thing having a
different name, character and use; or (b) bringing into existence of a new and
distinct object or article or thing with a different chemical composition or
integral structure.
2. Foreign Investment in Manufacturing
and Trading of Goods:
FDI Policy is
amended, Subject to the provisions of the FDI Policy, foreign investment in
‘manufacturing’ sector is under automatic route. Further a manufacturer is permitted
to sell its products manufactured in India through wholesale and/or retail,
including through e-commerce without Governmental approval.
3. FDI in Limited Liability
Partnerships:
Foreign
Direct Investment (FDI) in Limited Liability Partnerships (LLPs) has been
permitted subject to the following conditions:
a. FDI is permitted under the automatic
route in LLPs operating in sectors/activities where 100% FDI is allowed,
through the automatic route and no FDI - linked performance conditions.
b. An indian company or an LLP, having
foreign investment, will be permitted to make downstream investment in another
company or LLP in sectors in which 100% FDI is allowed under the automatic
route and there are no FDI linked performance conditions.
c. FDI in LLP is subject to the
compliance of the conditions of LLP Act, 2008
4. The definition of ‘Control’ and
‘Ownership’ has been amended to include the same for LLPs.
5. Condition for Downstream investment
by Indian Companies:
Downstream investments by Indian
Companies/LLPs will be subject to the following conditions:
a. Such a company/LLP is to notify SIA,
DIPP and FIPB of its downstream investment in the form available within 30 days
of such investment, even if capital instruments have not been allotted along
with the modality of investment in new/existing ventures (with/without
expansion programme);
b. Downstream investment by way of
induction of foreign equity in an existing Indian Company to be duly supported
by a resolution of the Board of Directors as also a shareholders agreement, if
any
c. Issue/Transfer/pricing/valuation of
shares shall be in accordance with applicable SEBI/RBI guidelines;
d. For the purpose of downstream
investment, the Indian companies/LLPs making the downstream investment would
have to bring in requisite funds from abroad and not leverage funds from the
domestic market. This would, however, not preclude downstream companies/LLPs,
with operation, from raising debt in the domestic market. Downstream investment
through internal accruals are permissible, subject to the provisions of para
3.10.3 and 3.10.4.1 For the purpose of FDI Policy, internal accruals will mean
as profits transferred to reserve account after payment of taxes.
6. Investment in Indian Companies with
no operations and Downstream investment:
Indian Companies which does not have
any operations and also does not have any downstream investment and which are
under the automatic route and without FDI linked performance conditions, will
be permitted to have infusion of foreign investment under automatic route.
However approval of the Government
will be required for such companies for infusion of foreign investment for undertaking
activities which are under government route.
Further, as and when such a company
commences business(s) or makes downstream investment, it will have to comply
with the relevant sectoral conditions on entry route, conditionalities and
caps.
7. Investment by Swap of shares:
In cases of Investment of Swap of
shares, irrespective of the amount, valuation of the shares will have to be
made by a Merchant Banker registered with SEBI of an investment Banker outside
India registered with the appropriate regulatory authority in the host country.
Approval of the Government will also
be a prerequisite for investment by swap of shares for sector under Government
approval route.
No approval of the Government if
required for investment in companies falling under the automatic route by way
of swap of shares.
8. Investment in India by Foreign
entities owned and controlled by NRIs:
A Company, trust and partnership firm
incorporated outside India and owned and controlled by non-resident Indians can
invest in India with the special dispensation as available to Non-resident
Indians under the FDI Policy.
9. Monitory limit for approval by Foreign Investment Promotion Board (FIPB):
Minister of Finance who is in charge
of FIPB would consider the recommendations of FIPB and can now approve proposal
up to Rs. 5000 crore.
The recommendations of FIPB on
proposals above Rs. 5000 crore will be placed before CCEA which will consider
the FDI proposals.
10. Foreign Investment in Tea/Coffee/Rubber/Cardamom/Palm Oil Tree/Olive Oil Tree:
Tea sector
including plantations/Coffee plantations/Rubber plantations/Cardamom
plantations/Palm Oil & Olive Oil tree Plantations are now open for 100%
foreign Investment under automatic route
Prior
approval of the State Government concerned is required in case of any future
land use change.
Note:
Besides the above, FDI is not allowed in any other plantation sector/activity.
11. Foreign Direct Investment in Defence Sector:
FDI in Defence Sector will be under Automatic route up to 49% (i.e. No Government
approval required to invite such investments) and FDI above 49% on a case to
case basis, wherever it is likely to result in access to modern and state of
the art technology in the country will be under the Government approval route.
Infusion of fresh foreign investment within the permitted automatic
route level, in a company not seeking Industrial License, resulting in change
in the ownership pattern or transfer of stake by existing investor to new
foreign investor, will require Government approval
License applications will be considered and licenses given by DIPP,
Ministry of commerce & Industry, in consultation with Ministry of Defence
and Ministry of external affairs
Foreign investment in the sector is subject to security clearance and
guidelines of Ministry of Defence; and
Investee Company should be structured to be self sufficient in areas of
product design and development. The investee/ joint venture company along with
manufacturing facility should also have maintenance and life cycle support
facility of the product being manufactured in India.”
12. FDI in DTH/Cable Networks:
Foreign
capital infusion up to 49% - Automatic Route and beyond 49 % under Govt. route
in the following activities:
a.
Telesports (setting up of up-linking HUBs/Teleports),
b.
Direct to Home;
c.
Cable Networks (Multi System Operators [MSOs]
operating at National or State or District level and undertaking upgradations
of networks towards digitalization and addressability;
d.
Mobile TV;
e.
Headend-in-the Sky Broadcasting services (HITS)
f.
Cable Networks (Other MSOs not undertaking upgradation
of networks towards digitalization and addressability and Local Cable Operators
[LCOs]) are allowed
13. FDI in FM radio
The Limit for Foreign Direct
Investment has been increased to 49% under the Government Route.
The grant of permission for setting
up of FM radio stations would be subject to the terms and conditions, as
specified from time to time, by the ministry of Information and Broadcasting.
14. Up-Linking of ‘News & Current Affairs’ TV Channels
The Limit for Foreign Direct
Investment has been increased to 49% under the Government Route.
15. Up-Linking of ‘Non-News & Current Affairs’ TV Channels/ Down-linking
of TV Channels
The Limit for Foreign Direct Investment is now placed under the
Automatic Route up to 100%. Hence no Government approval will be required.
16. FDI in Air Transport Service:
FDI in Scheduled Air Transport Service/ Domestic Scheduled Passenger
Airline and Regional Air Transport service is now allowed up to 49% under the
Automatic route for Non Residents and up to 100% for Non-resident Indians.
FDI in non-scheduled Air Transport service is allowed up to 100% under
the Automatic route.
FDI in Helicopter services/seaplane services requiring DGCA approval will
be allowed up to 100% under the Automatic route.
17. FDI in Ground Handling Services:
FDI in Ground Handling Services subject to sectoral regulations and
security clearances will be allowed up to 100% under the automatic route.
FDI in Maintenance and Repair organizations; flying training institutes;
and technical training institutions will be allowed up to 100% under the
Automatic route.
18. FDI in Establishment and operation Space Satellites:
FDI in
Satellites- establishment and operations, subject to the sectoral guidelines of
Department of Space / ISRO will be allowed up to 100% under the Government
route.
19. FDI in Credit Information Companies:
FDI in
Credit Information Companies will be allowed up to 100% under the Automatic
Route.
Foreign
investment in Credit Information Companies is subject to the Credit Information
Companies (Regulation) Act, 2005
Foreign
investment is permitted subject to the regulatory clearance from RBI.
Such FII/FPI investment would be
permitted subject to the conditions that:
a. A single entity should directly or
indirectly hold below 10% equity.
b. Any Acquisition in excess of 1% will
have to be reported to RBI as a mandatory requirement; and
c. FII/FPI investing in CICs shall not
seek a representation on the Board of Directors based upon their shareholding.
20. Condition for FDI in Construction Development:
As per the existing policy the foreign investor was allowed to exit the
company and repatriate the money only after completion of the project.
A foreign investor will be permitted to exit and repatriate the foreign
investment before the completion of the project provided that the
lock-in-period of 3years with reference to each phase of project is now
classified as project.
Each phase of project is to be calculated separately which was not
provided before the amendment. This will give flexibility to the foreign
investor to exit the project.
21. Whole Sale Trading conditions
Now a wholesale/ cash & carry trader can undertake Single Brand
Retail Trading (SBRT)subject to the conditions related to FDI in SBRT sectors.
Conditions
of the FDI policy for wholesale/cash and carry business and for retail business
have to be separately complied with by the respective business.
22. Conditions for Single Brand Retail Trading:
As per
existing policy for SBRT mandates that in case of FDI beyond 51%, sourcing of
30% of the value of goods purchased has to be done from India.
Now this
outsourcing requirement has to be reckoned from the opening of first store.
SBRT entities operating through brick and mortar services are now allowed to
take retail through e-commerce.
As against
average of first five years now this condition has to be fulfilled for the
opening of first store which appears to be more stringent.
23.
FDI in duty free shops:
FDI in duty
free shops was not permitted as per existing policy.
FDI in duty
free shops in now permitted up to 100 % under Automatic Route.
Foreign
Investment in Duty Free Shops is subject to compliance of conditions as
stipulated under the Customs Act, 1962 and other laws, rules and regulations.
Duty Free
Shop entity shall not engage into any retail trading activity in the Domestic
Tariff Area of the country.
