FOREIGN DIRECT INVESTMENT
POLICY ON FOREIGN DIRECT INVESTMENT
India has among the most liberal and transparent policies on FDI among the emerging economies. FDI up to 100% is allowed under the automatic route in all activities/ sectors except the following which require prior approval of the Government:
- Activities/items that require an Industrial license
- Proposals in which the foreign collaborator has an existing financial / technical collaboration in India in the 'same' field (refer press Note no. 1 of 2005 series),
- Proposals for acquisition of shares in an existing Indian Company in:
 Financial Service Sector and
Where Securities & Exchange Board of India (Substantial Acquisition of Shares and Takeovers) regulation, 1997 is attracted;
- All proposals falling outside notified sectoral policies/caps or under sectors in which FDI is not permitted.
FDI policy is reviewed on an on going basis and changes in spectral policy /sectoral equity cap are notified through Press Notes by the secretariat for industrial assistance (SIA), Department of Industrial Policy and Promotion. All Press Notes are available at the Website (www.dipp.gov.in) Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA) also notifies FDI policy. Please refer to RBI website (www.rbi.org.inwww.rbi.org.in).
PROCEDURE UNDER AUTOMATIC ROUTE
FDI in sector/ activities to the extent permitted under automatic route does not require any prior approval either by Government of India or RBI. The investor are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 Days of shares to foreign investors.
PROCEDURE UNDER GOVERNMENT APPROVAL
FDI in activities not covered under the automatic route requires prior Government Approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite proposals involving foreign investment/ foreign technical collaboration are also granted on the recommendation of the FIPB.
Application of all FDI cases, except Non-Resident indian (NRI) investments and 100% Export Oriented Units (EOUs), should be submitted to the FIPB Units, Department of Economic Affairs (DEA), Ministry of Finance.
Applications for NRI and 100% EOU cases should be presented to SIA in Department of Industrial Policy and Promotion.
Application can also be submitted with Indian Missions abroad who forward them to the Department of Economic Affairs for further processing.
Application can be made in Form FC-IL, which can be downloaded from http://www.dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable.
PROHIBITED SECTORS
The extant policy does not permit FDI in the following cases;
- Gambling and betting
- Lottery Business
- Atomic Energy
- Retail Trading
- Agricultural or plantation activities or Agriculture (excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisiculture and Cultivation of Vegetables, Mushrooms etc. under controlled conditions and services related to agro and allied sectors) and Plantations (other than Tea plantations)
GENERAL PERMISSION OF RBI UNDER FEMA
Indian companies having foreign investment approval through FIPB do not require any further clearance from RBI for receiving inward remittance and issue of shares to foreign investors.
The companies are required to notify the concerned Regional Office of the RBI of receipt of inward remittances within 30 Days of such receipt and within 30 days of issue of shares to foreign investors or NRIs
PARTICIPATION BY INTERNATIONAL FINANCIAL INSTITUTIONS
Equity participation by international financial institutions such as ADB, IFC, CDC, DEG, etc., in domestic companies is permitted through automatic route, subject to SEBI/RBI regulations and sector specific cap on FDI.
ISSUE AND VALUATION OF SHARES IN CASE OF EXISTING COMPANIES
According to RBI / SEBI guidelines, in case of listed companies, the issue price shall be either at:
(a) The average of the weekly high and low of the closing prices of related shares quoted on the stock exchange during the six months preceding the relevant date, or
(b) The average of the weekly high and low of the closing prices of related shares quoted on the stock exchange during the two weeks preceding the relevant date.
The stock exchange referred to is the one at which the highest trading volume in respect of the share of company has been recorded during the preceding six months prior to the relevant date.
The relevant date is the date thirty days prior to the date on which the meeting of the General Body of the shareholder is convened. In all other cases a company may issue shares as per the RBI regulation in accordance with the guidelines issued by the erstwhile Controller of Capital Issues.
Other relevant guidelines of Securities and Exchange Board of India (SEBI)/ and RBI, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, wherever applicable, would need to be followed. Further information could be obtained at Security and Exchange Board of India's (SEBI) website : www.sebi.gov.in
ISSUE OF RIGHTS/BONUS SHARES
General permission of the RBI is available to Indian companies to issue right/bonus shares, subject to certain conditions.Entitlement of rights shares is not automatically available to investors who have been allotted such shares as Overseas Corporate Bodies
(OCBs). Such issuing companies would have to seek specific permission from RBI, Foreign Exchange Department, Foreign Investment Division, Central Office, Mumbai for issue of shares on right basis to erstwhile OCBs.
ISSUE OF SHARES UNDER MERGER/AMALGAMATION
Where a Scheme of merger or amalgamation of two or more Indian companies has been approved by a court in India, the transferee company may issue shares to the shareholders of the transfer or company resident outside India, subject to ensuring that the percentage of shareholding of persons resident outside India in the transferor new company does not exceed the percentage specified in the approval granted by the Central Government or the
Reserve Bank of India. This entitlement of rights shares is not automatically available to investors who have been allotted such shares as OCBs. For this specific permission from RBI is necessary.
ISSUE OF SHARES UNDER ESOP SCHEME
Under this Scheme a company may issue shares to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, directly or through a Trust, subject to the condition that the scheme has been drawn in terms of relevant regulations issued by the SEBI and face value of the shares to be allotted under the scheme to the non-resident employees does not exceed 5% of the paid-up capital of the issuing company.
TRANSFER OF SHARES/DEBENTURES
Transfer of shares in the following categories of cases is allowed under automatic route :
a) Transfer of shares from resident to non-resident (including transfer of subscribers' shares to non-residents) other than in financial services sector provided the investment is covered under automatic route, does not attract the provisions of SEBI's (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, falls within the sectoral cap and also complies with prescribed pricing guidelines.
b) Conversion of ECB/Loan into equity provided the activity of the company is covered under automatic route, the foreign equity after such conversion falls within the sectoral cap and also complies with prescribed pricing guidelines.
c) Cases of increase in foreign equity participation by fresh issue of shares as well as conversion of preference shares into equity capital provided such increase within the sectoral cap in the relevant sectors, are within the automatic route and also complies with prescribed pricing guidelines.
General permission of the RBI has been granted to non-residents/NRIs for transfer of shares and convertible debentures of an Indian company as under :
a) A person resident outside India (Other than NRI and OCB) may transfer by way of sale or gift shares or convertible debentures to any person resident outside India (including NRIs); provided transferee has obtained prior permission of SIA/FIPB, in terms of Press Note No.1 (2005 Series) to acquire the shares if he has an existing venture or tie-up in India in the same field in which the Indian company whose shares are being transferred is engaged.
b) NRI or OCB may transfer by way of sale or gift the shares or convertible debentures held by him or it to another nonresident Indian; provided transferee has obtained prior permission of Central Government in terms of Press Note No.1 (2005 Series) to acquire the shares if he has an existing venture or tie-up in India in the same field in which the Indian company whose shares are being transferred, is engaged.
c) The person resident outside India may transfer any security to a person resident in India by way of gift.
d) A person resident outside India may sell the shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a registered broker.
AMERICAN DEPOSITORY RECEIPTS (ADRs)/GLOBAL DEPOSITORY RECEIPTS (GDRs)
An Indian corporate can raise foreign currency resources abroad through the issue of ADRs or GDRs by issuing its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs and/ or ADRs, subject to the conditions that :
a) the ADRs/GDRs are issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme,1993 and guidelines issued by the Central Government there under from time to time
b) The Indian company issuing such shares has an approval from the Ministry of Finance, Government of India to issue such ADRs and/or GDRs or is eligible to issue ADRs/ GDRs in terms of the relevant scheme in force or notification issued by the Ministry of Finance, and
c) Is not otherwise ineligible to issue shares to persons resident outside India in terms of these Regulations.
There is no limit up to which an Indian company can raise ADRs/GDRs. However, the Indian company has to be otherwise eligible to raise foreign equity under the extant FDI policy.
There are no end-use restrictions on GDR/ADR issue proceeds, except for an express ban on investment in real estate and stock markets.
The FCCB issue proceeds need to conform to external commercial borrowing end use requirements. In addition, 25 per cent of the FCCB proceeds can be used for general corporate restructuring.
Regulation 4 of Schedule-I of FEMA Notification No. 20 deal with the issue of ADR/GDR by an Indian company.
A company engaged in the manufacture of items covered under Automatic route, whose direct foreign investment after a proposed GDRs/ADRs/FCCBs issue is likely to exceed the equity limits under the automatic route, or which is implementing a project falling under Government approval route, would need to obtain prior Government clearance through FIPB before seeking final approval from the Ministry of Finance.
FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)
FCCBs are issued in accordance with the [Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993, and subscribed by a non-resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments.
ELIGIBILITY
The eligibility for issue of Convertible Bonds or Ordinary Shares of issuing company is as under :
a) An issuing company desirous of raising foreign funds by issuing Foreign Currency Convertible Bonds or ordinary shares for equity issues through Global Depositary Receipt
i) Can issue FCCBs up to US$50 Million under the Automatic route,
ii) From US$50 -100 Million, the companies have to take RBI approval,
iii) From US$100 Million and above, prior permission of the Department of Economic Affairs is required.
PREFERENCE SHARES
Foreign investment through preference shares is treated as Foreign Direct Investment. Issue of preference share should conform to guidelines prescribed by the SEBI and RBI and other statutory requirements. The policy in regard to preference shares is tabulated below :
1. Procedure: -
Automatic or Government approval route depending upon the activity/sector of the company.
2. Whether considered as part of share capital ?
Yes, and fall outside the ECB as part of share guidelines/cap.
3. Whether considered while calculating equity cap, if any?
Yes, provided they carry a conversion while calculating option.equity cap, if any?
4. Duration of conversion :-
As per the maximum limit prescribed under the Company's Act or as agreed to in shareholder's agreement, whichever is less.
5. Dividend rate
This should not exceed the limit prescribed by the Ministry of Finance
FDI IN EOUs/SEZs/INDUSTRIAL PARK/EHTP/STP SPECIAL ECONOMIC ZONES (SEZs)
FDI up to 100% is permitted under the automatic route for setting up of Special Economic Zone (SEZ). Proposals not covered under the automatic route require approval by FIPB.
HOW TO SET UP UNIT IN SEZ
Units in SEZ qualify for FDI approval through automatic route subject to sectoral norms.
I. For setting up a unit in an SEZ, three copies of the application in the form given in Appendix-14-I-A of Foreign Trade Policy may be submitted to the Development Commissioner (DC) of the SEZ concerned.
II. Proposals for setting up units in SEZ other than those requiring industrial License may be granted approval by the Development Commissioner.
III. Proposals for setting up units in SEZ requiring Industrial License may be granted approval by the Development Commissioner after clearance of the proposal by the SEZ Board of Approval.
IV. Letter of Permission (LOP)/Letter of Intent(LOI) issued to SEZ units by the Development Commissioner would be construed as a license for all purposes, including for procurement of raw material and consumables either directly or through canalizing agency.
V. The LOP/LOI shall specify the items of manufacture/service activity, annual capacity, projected annual export for the first years in dollar terms, Net Foreign Exchange Earnings (NFE), limitations, if any, regarding sale of finished goods, by products and rejects in the DTA and such other matter as may be necessary and also impose such conditions as may be required.
Details about the type of activities permitted are available in the Foreign Trade Policy issued by Department of Commerce. (dgft.delhi.nic.in)
100% EXPORT ORIENTED UNITS (EOUs)
FDI up to 100% is permitted under the automatic route for setting up 100% EOU, subject to sectoral policies. Proposals not covered under the automatic route would be considered and approved by FIPB.
INDUSTRIAL PARK
FDI up to 100% is permitted under automatic route for setting up of Industrial Park.
PROCEDURE FOR APPROVAL ELECTRONIC HARDWARE TECHNOLOGY PARK (EHTP) UNITS
Proposals for FDI/NRI investment in EHTP Units are eligible for approval under the automatic route, subject to parameters. For proposals not covered under automatic route, the applicant should seek separate approval of the Government through the FIPB.
SOFTWARE TECHNOLOGY PARK (STP) UNITS
Proposals for FDI/NRI investment in STP Units are eligible for approval under automatic route subject to parameters. For proposals not covered under automatic route, the applicant should seek separate approval of the Government through the FIPB.
CAPITALIZATION OF IMPORT PAYABLES
FDI inflows are required to be under the following mode :
i. By inward remittances through normal banking channels or
ii. By debit to the NRE/FCNR account, of person concerned, maintained with an authorized dealer/authorized bank.
Issue of equity to non-residents against other modes of FDI inflows or in kind is not permissible, except issue of equity shares against lump-sum fee and royalty payable for technology collaborations and external commercial borrowings (ECBs) in convertible foreign currency which are permitted under the automatic route subject to meeting all applicable tax liabilities and sector specific guidelines.
INDUSTRIAL LICENSING
INDUSTRIAL LICENSING POLICY
Industrial Licenses are regulated under the Industries (Development & Regulation) Act, 1951. With progressive liberalization and deregulation of the economy, the requirement of industrial licensing have been substantially reduced. At present industrial license for manufacturing is required only for the following :
i. Industries retained under compulsory licensing,
ii. Manufacture of items reserved for small scale sector by non-SSI units; and
iii. When the proposed location attracts locational restriction
INDUSTRIES REQUIRING COMPULSORY LICENSING
The following industries require compulsory industrial license :
i. Distillation and brewing of alcoholic drinks.
ii. Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
iii. Electronic Aerospace and defence equipment: all types;
iv. Industrial explosives, including detonating fuses, safety fuses,gun powder, nitrocellulose and matches;
v. Hazardous chemicals;
a. Hydrocyanic acid and its derivatives
b. Phosgene and its derivatives
c. Isocyanates and di-isocyanates of hydrocarbon, not elsewhere specified (example: Methyl Isocyanate).
SMALL SCALE SECTOR
An industrial undertaking is defined as a small-scale unit if the capital investment in plant and machinery does not exceed Rs 10 million.
Small-scale units can get registered with the Directorate of Industries/District Industries Centre of the State Government. Such units can manufacture any item, and are also free from locational restrictions.
The Government has reserved certain items for exclusive manufacture in the small-scale sector. (List available at www.dipp.gov.in)
MANUFACTURE OF ITEMS RESERVED FOR SMALL-SCALE SECTOR
Non small-scale units can manufacture items reserved for the small-scale sector only after obtaining an industrial license. In such cases, the non-small scale unit is required to undertake an obligation to export 50 per cent of the production of SSI reserved items.
FDI IN SSI UNITS
A small-scale unit cannot have more than 24 per cent equity in its paid up capital from any industrial undertaking, either foreign or domestic. If the equity from another company (including foreign equity) exceeds 24 per cent, even if the investment in plant and machinery in the unit does not exceed Rs 10 million, the unit looses its small-scale status and shall require an industrial license to manufacture items reserved for small-scale sector.
LOCATIONAL RESTRICTIONS
Industrial undertakings are free to select the location of their projects. Industrial License is required if the proposed location is within 25 KM of the Standard Urban Area limits of 23 cities having population of 1 million as per 1991 census. List of such cities is at Annexure IX.
Locational restriction does not apply :
i) If the unit were to be located in an area designated as an "industrial area'' before the 25th July, 1991.
ii) In the case of Electronics, Computer software and Printing and any other industry, which may be notified in future as "non polluting industry".
The location of industrial units is subject to applicable local zoning and land use regulations and environmental regulations.
PROCEDURE FOR OBTAINING INDUSTRIAL LICENSE :
Industrial License is granted by the Secretariat for Industrial Assistance (SIA) on the recommendation of the Licensing Committee.
Application for industrial license is required to be submitted in the prescribed form. (Form FC-IL). This form is available in the Public Relation and Complaint Section (PR&C) of the SIA, all outlets dealing in Government Publications, Indian Embassies, and can be downloaded from the web site http://www.dipp.gov.in.
Application accompanied with a crossed demand draft of Rs. 2500/- (appr. US$ 55) may be submitted to the Public Relation and Complaint Section (PR&C) of Department of Industrial Policy & Promotion.
Decisions are usually taken within 4-6 weeks of filing the application.
POLICY FOR INDUSTRIES EXEMPT FROM LICENSING-INDUSTRIAL ENTREPRENEURS MEMORANDUM (IEM)
Industrial undertakings exempt from industrial license are only required to file an Industrial Entrepreneur Memorandum (IEM) in Part 'A', in the prescribed format,
PROCEDURE FOR IEM
The form for filing an IEM is available at Public Relation and Complaint Section (PR&C), all outlets dealing in Government publications, Indian Embassies, and can also be downloaded from the web site www.dipp.gov.in
The IEM can be filed with the PR&C section in SIA either in person or by post. The IEM should be submitted along with a crossed demand draft of Rs.1000/- (appr. US$ 22) for up to 10 items proposed to be manufactured. For more than 10 items, an additional fee of Rs. 250 (appr. US$ 6) for up to 10 additional items needs to be paid.
On filing the IEM, an acknowledgement containing the SIA Registration Number, for future reference, is issued. In case IEM is sent by post, the acknowledgement is sent by post & no further approval is required.
An IEM would stand cancelled if the proposal requires compulsory license.
Upon commencement of commercial production, Industrial undertakings need to file information in Part 'B' of the IEM to PR&C Section in SIA. No fee is to be paid for filing Part B.
All industrial undertakings whether or not exempt from compulsory industrial licensing, are statutorily required to submit monthly production return in the prescribed proforma every month. This should reach the Industrial Statistics Unit (ISU) of the Department positively by the 10th of the following month.
CARRY ON BUSINESS (COB) LICENSE
Small- scale units by virtue of their natural growth may exceed the investment limit prescribed for small-scale units. In such cases these units need to obtain a Carry-on-Business (COB) License based on the best production in the preceding three years. No export obligation is fixed on the capacity for which the COB license is granted.
The application for COB licence should be submitted in revised form "EE", which can be downloaded from the web site www.dipp.gov.in along with a crossed demand draft of Rs. 2500/-(appr. US$ 55)
However, on further expansion of its capacity beyond the capacity included in COB license, the unit would need to obtain an industrial license.
PAYMENT OF PRESCRIBED FEE
The fee prescribed for various applications, licenses are to be paid through crossed demand draft drawn in favour of the Pay & Accounts Officer, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, payable at New Delhi.
ENVIRONMENTAL CLEARANCES
Entrepreneurs are required to obtain Statutory clearances relating to Pollution Control and Environment as may be necessary, for setting up an industrial project for 31 categories of industries in terms of Notification S.O. 60(E) dated 27.1.94 as amended from time to time, issued by the Ministry of Environment & Forests under The Environment (Protection) Act, 1986. This list includes petrochemical complexes, petroleum refineries, cement, thermal power plants, bulk drugs, fertilizers, dyes, paper, etc.
However, if investment in the project is less than Rs. 1 billion, such Environmental clearance is not necessary, except in cases of pesticides, bulk drugs and pharmaceuticals, asbestos and asbestos products, integrated paint complexes, mining projects, tourism projects of certain parameters, tarred roads in Himalayan areas, distilleries, dyes, foundries and electroplating industries.
Setting up industries in certain locations considered ecologically fragile (e.g. Aravalli Range, coastal areas, Doon valley, Dahanu, etc.) are guided by separate guidelines issued by the Ministry of Environment and Forests.
For further details please refer the website of Ministry of Environment and Forests (http://envfor.nic.in).
FOREIGN TECHNOLOGY AGREEMENTS
GENERAL POLICY
For promoting technological capability and competitiveness of the Indian industry, acquisition of foreign technology is encouraged through foreign technology collaboration agreements. Induction of know-how through such collaborations is permitted either through automatic route or with prior Government approval.
SCOPE OF TECHNOLOGY COLLABORATION
The terms of payment under foreign technology collaboration, which are eligible for approval through the automatic route and by the Government approval route, includes
technical know how fees, payment for design and drawing, payment for engineering service and royalty.
Payments for hiring of foreign technicians, deputation of Indian technicians abroad, and testing of indigenous raw material, products, indigenously developed technology in foreign countries are governed by separate RBI procedures and rules pertaining to current account transactions and are not covered by the foreign technology collaboration approval. For details please refer to the website of the RBI.
AUTOMATIC ROUTE
Payment for foreign technology collaboration by Indian companies are allowed under the automatic route subject to the following limits :
(i) the lump sum payments not exceeding US$2 million;
(ii) royalty payable being limited to 5 per cent for domestic sales and 8 per cent for exports, without any restriction on the duration of the royalty payments. The royalty limits are net of taxes and are calculated according to standard conditions.
The royalty will be calculated on the basis of the net ex-factory sale price of the product, exclusive of excise duties, minus the cost of the standard bought-out components and the landed cost of imported components, irrespective of the source of procurement, including ocean freight, insurance, custom duties, etc.
USE OF TRADEMARKS AND BRAND NAME
Payment of royalty up to 2% for exports and 1% for domestic sales is allowed under automatic route for use of trademarks and brand name of the foreign collaborator without technology transfer.
Royalty on brand name/trade mark shall be paid as a percentage of net sales, viz., gross sales less agents'/dealers' commission, transport cost, including ocean freight, insurance, duties, taxes and other charges, and cost of raw materials, parts and components imported from the foreign licensor or its subsidiary/affiliated company
In case of technology transfer, payment of royalty includes the payment of royalty for use of trademark and brand name of the foreign collaborator.
PROCEDURE FOR AUTOMATIC ROUTE
Authorised Dealers (ADs) appointed by the RBI allow remittances for royalty, payment of lump-sum fee and remittance for use of Trademark /Franchise in India within the limits prescribed under the automatic route.
RBI's prior approval is required for remittance towards purchase of trade mark/franchise.
GOVERNMENT APPROVAL - PROJECT APPROVAL BOARD (PAB)
Royalty payment in the following cases requires prior Govt. approval (through PAB when only technical collaboration is proposed and through FIPB where both financial & technical collaboration are proposed) :
a) Sectors/activities which are not on the automatic route for FDI, or
b) Proposals not meeting any of the parameters for automatic approval
PROCEDURE FOR GOVERNMENT APPROVAL
Proposals for foreign technology collaboration not covered under the automatic route are considered by the Project Approval Board (PAB) in the Department of Industrial Policy and Promotion.
Application in such cases should be submitted in Form FC-IL to the Secretariat for Industrial Assistance. Proposals where both financial & technical collaboration are proposed, application is to be submitted to FIPB. No fee is payable.
ENTRY OPTIONS FOR FOREIGN INVESTOR
ENTRY OPTIONS
A foreign company planning to set up business operations in India has the following options:
AS AN INCORPORATED ENTITY
By incorporating a company under the Companies Act, 1956 through
i Joint Ventures; or
ii Wholly Owned Subsidiaries
Foreign Equity in such Indian Companies can be up to 100% depending on the requirement of the investor, subject to any equity caps prescribed in respect of the area of activities under the Foreign Direct Investment (FDI) policy.
AS AN UNINCORPORATED ENTITY
i) As a foreign Company through
i. Liaison Office/Representative Office
ii. Project Office
iii. Branch Office
Such offices are undertaken activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office of other place of business) Regulations, 2000.
INCORPORATION OF COMPANIES
For registration and incorporation, an application has to be filled with the Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian Company, it is subject to Indian Laws and regulations as applicable to other domestic Indian companies.
For details please visit the website of Ministry of Company Affairs at http://dca.nic.inhttp://dca.nic.in
LIAISON OFFICE/ REPRESENTATIVE OFFICE
The role of liaison office is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. Liaison office can not undertake any commercial activity directly or indirectly and can not, therefore, earn any income in India. Approval for establishing a liaison office in India is granted by Reserve Bark of India (RBI).
PROJECT OFFICE
Foreign companies planning to execute specific projects in India can set up a temporary project/site office in India . RBI has now granted a general permission to foreign entities to establish project offices subject to specified condition. Such offices can not undertake or carry on any activity other than activity relating and incidental to execution of the project. Project offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.
BRANCH OFFICE
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up branch offices in India for the following purposes:
a. Export/Import of goods
b. Rendering professional or consultancy services
c. Carrying out research work, in which the parent company is engaged.
d. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
e. Rendering services in Information Technology and development of software in India.
f. Representing the parent company in India and acting as buying/selling agents in India.
g. Rendering technical support to the products supplied by the parent/ group companies.
h. Foreign airlines/shipping company
Branch offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian Taxes and subject to RBI guidelines. Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).
BRANCH OFFICE ON "STAND ALONE BASIS" IN SEZ
Such Branch Offices would be isolated and restricted to Special Economic Zone (SEZ) alone and no business activity/ transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.
No approval shall be necessary from RBI for a company to establish a branch /unit in SEZs to undertake manufacturing and service activities subject to the following conditions:
a. Such units are functioning in those sectors where 100% FDI is permitted.
b. Such units comply with part XI of the Companies Act (section 592 to 602)
c. Such units functions on a stand alone basis,
d. In the event of winding up of business and for remittance of winding-up proceeds, the branch shall approach an authorized dealer in foreign exchange with the document required as per FEMA.
Procedure for Liaison office/Project office/Branch office
Application for setting up Liaison Office/ Project office / Branch Office may be submitted to Chief General Manager, Exchange Control Department (Foreign Investment Division), RBI Central Office, Mumbai-400 001, in the form FNC 1 (available at RBI website at www.rbi.org.in)www.rbi.org.in
INVESTMENT IN A FIRM OR A PROPRIETARY CONCERN BY NRIS
A Non-Resident Indian or a Person of Indian Origin Resident Outside India may invest by way of contribution to the capital of a firm or a proprietary concern in India on a non-repatriation basis provided,
- Amount is invested by inward remittance or out of NRE/FCNR/NRO account maintained with AD
- The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business i.e. dealing in land and immovable property with a view to earning income there from.
- Amount invested shall not be eligible for repatriation outside India .
NRIs/PIO may invest in sole proprietorship concerns/ partnership firms with repatriation benefits with the approval of Department of Economic Affairs, Government of India / RBI.
INVESTMENT IN A FIRM OR A PROPRIETARY CONCERN BY OTHER THAN NRIS
No person resident outside India other than NRIs/PIO shall make any investment by way of contribution to the capital of a firm or a proprietorship concern or any association of persons in India. The RBI may, on an application made to it, permit a person resident outside India to make such investment subject to such terms and conditions as may be considered necessary.
FREQUENTLY ASKED QUESTIONS
1. What are the forms in which business can be conducted by a foreign company in India?
Ans: Foreign companies can make investments or operate their business in a number of ways such as Liaison/ Representative Office, Branch Office, Project Office, 100% Wholly owned Subsidiary, and Joint Venture company. The requisite approval can be granted by Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB). Any company set up with FDI has to be incorporated under the Indian Companies Act with the Registrar of Companies, Ministry of Company Affairs and all Indian operations would be conducted through this company.
2. What proposals require an industrial license (IL) and how is it obtained?
Ans: Under the New Industrial Policy, all industrial undertakings are exempt from licensing except for industries requiring compulsory industrial license. The project should not be located within 25 kilometers of a city with a population of more than one million as per 1991 Population Census.
The Government has substantially liberalized the procedures for obtaining an Industrial License. The application in form IL-FC should be filed with the SIA. Approvals are normally granted within 4-6 weeks.
3. What is the procedure for a delicensed sector?
Ans: An Industrial undertaking exempted from licensing needs only to file information in the Industrial Entrepreneurs Memorandum (IEM) with the SIA, which will issue an acknowledgement. No further approvals are required.
4. What is the taxation policy in India?
Ans: Foreign nationals working in India are generally taxed only on their Indian income. Income received from sources outside India is not taxable unless it is received in India. The Indian tax laws provide for exemption of tax on certain kinds of income earned for services rendered in India. Further, foreign nationals have the option of being taxed under the tax treaties that India may have signed with their country of residence.
Remuneration for work done in India is taxable irrespective of the place of receipt. Remuneration includes salaries and wages, pensions, fees, commissions, profits in lieu of or in addition to salary, advance salary and perquisites. Taxable payments include all allowances and tax equalisation payments unless specifically excluded. The stock options granted by the employer are taxable as capital gains at the time of sale of shares acquired due to exercise of options.
5. What is the situation regarding intellectual property rights protection in India?
Ans: India is a signatory to the agreement concluding the Uruguay Round of GATT negotiations and establishing the World Trade Organisation (WTO) and its laws today are WTO compliant. The important regulations dealing with Intellectual Property Rights are:
- The Patents Act
- The Trademarks Act
- The Geographical Indication of Goods Act
- The Designs Act
6. Is investment by non-resident Indians (NRIs) permitted?
Ans: The Government attaches importance to investments by NRIs. Government has provided a liberalised policy framework for approval of NRI investments through both the Automatic and the Government route. NRIs are permitted to invest up to 100% equity in the Real Estate and Civil Aviation Sectors. Automatic Approval is given by the RBI to all NRI proposals with their investment up to 100% for all items/activities except a few exceptions mentioned in Press Note 2 (2000 series) read with sector specific guidelines. Government approval is required for all proposals not qualifying under Automatic Route.
7. Can profits, dividends, royalty, know how payments be repatriated from India?
Ans: All profits, dividends, royalty, know how payments that have been approved by the Government/RBI can be repatriated. Some sectors like investment in development of integrated township, NRI Investment in real estates, etc. may attract a lock-in period.
8. What are the formalities a joint venture company has to complete to increase the foreign equity holding?
Ans: The following formalities are required for the joint ventures that want to increase in their foreign equity holding by acquisition of shares or by any other means.
a) If only the quantum of foreign equity increased without change in percentage then Press Note no. 7 (1999 series) may be followed.
b) For increase in percentage of foreign equity by way of expansion of capital base, automatic route or FIPB /Government route would apply depending upon the nature of proposal in terms of Press Note No. 2 (2000 series)
c) Cases involving increase in percentage in foreign equity by way of acquiring existing shares in an Indian company would necessarily require prior approval of FIPB/Government if the activity is in the financial sector or the provision of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 is attracted.
d) In cases involving inclusion of an additional foreign collaborator, guidelines laid down in Press Note No. 1 (2005 series) would have to be satisfied.
9. What is the policy of conversion of non-repatriable shares into repatriable shares?
Ans: FIPB approval is required. Where original investment was made in foreign exchange, the change is allowed without any conditions; if not, the sale proceed will have to be repatriated to India by opening an NRO account.
10. What is the mechanism for publicizing the changes in the FDI policies?
Ans: Changes in FDI policies are brought out in the form of Press Notes by Department of Industrial Policy & Promotion (DIPP). Soon after releasing the Press Notes to the media, it is also loaded on the Departmental website (http://dipp.gov.in).
11. What mechanism is available alternative dispute resolution (ICADR)?
Ans: International Center for Alternative Dispute Resolution (ICADR) has been established as an autonomous organization under the aegis of Ministry of Law & Justice to promote settlement of domestic and international disputes by different modes of alternate dispute resolution. ICADR has its headquarters in New Delhi and has regional office in Lucknow and Hyderabad. More information on ICADR can be obtained from the website: http://www.icadr.org
GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT (FDI) PROPOSALS BY THE FOREIGN INVESTMENT PROMOTION BOARD (FIBP)
These guidelines stand modified to the extent changes have been notified by secretariat for Industrial Assistance from time to time .the following guidelines are laid-down to enable the Foreign Investment Promotion Board (FIBP) to consider the proposals for Foreign Direct Investment (FDI) and formulate its recommendations;
1. All applications should be put up before the FIBP within 15 days and it should be ensured that comments of the Administrative Ministries are placed before the Board either prior to/or in the meeting of the Board.
2. Proposals should be considered by the Board keeping in view the time frame of 30 days for communicating Government decision (i.e. approval of FM/CCEA or rejection as the case may be).
3. In cases in which either the proposal is not cleared or further information is required, in order to obviate delays presentation by applicant in the meeting of the FIBP should be resorted to.
4. While considering cases and making recommendations, FIBP should keep in mind the sectoral policies vis-à-vis the proposal(s).
5. FIPB would consider each proposal in totality (i.e. if it includes apart from foreign investment, technical collaboration/industrial license) for composite approval or otherwise. However, the FIPB's recommendations would relate only to the approval for foreign financial and technical collaboration and the foreign investor will need to take other clearances separately.
6. The Board should examine the following while considering proposals submitted to it for consideration:
i) Whether the items of activity involve industrial license or not and if so the considerations for grant of industrial license must be into;
ii) Whether the proposal involves technical collaboration and if so the source and nature of technology sought to transferred;
iii) Whether proposal involves any mandatory requirement for exports and if so whether the applicant is prepared to undertake such obligation (this is for items covered for small scale sector as also for dividend balancing, and for 100% EOUs/EPZ units);
iv) Whether the proposal involves any export projection and if so the items of export and the projected destinations;
v) Whether the proposals has concurrent commitment under other schemes such as EPCG Scheme etc;
vi) In the case of Export Oriented Units (EOUs) whether the prescribed minimum value addition norms and the minimum turn over of exports are met or not;
vii) Whether the proposal involves relaxation of locational restrictions stipulated in the industrial licensing policy;
viii) Whether the proposal has any strategic or defence related considerations, and
ix) Whether the proposal has any existing joint venture or technology transfer/trademark agreement in the same field in India, and if so whether this agreement is sick or defunct; the investment by either party is less than 3% & Investment is by FVCI, the detailed circumstance in which it is considered necessary to set-up a new technology transfer (including trade mark),and proof that the new proposal would not in any way jeopardize the interest of the existing joint venture or technology/trade mark partner or other stock holders.
7. While considering proposals the following may be prioritized;
a) Items/activities covered under Government route (i.e. those which do not qualify under automatic route).
b) Items falling in infrastructure sector.
c) Items which have an export potential
d) Items which have a large scale employment potential and especially for rural people.
e) Items which have a direct backward linkage with agro business/farm sector.
f) Items which have greater social relevance such as hospitals, human resource development, life saving drugs and equipment.
g) Proposals, which resulting introduction of technology or infusion of capital.
8. The following should be especially considered during the scrutiny and consideration of proposals;
a) The extent of foreign equity proposed to be held (keeping in view sectoral caps if any: - e.g.24% for SSI units, 49% for air taxi/airlines operators, 74% in basic/cellular/paging in Telecom sector etc).
b) Extent of equity with composition of foreign/NRI/resident Indians.
c) Extent of equity from the point of view whether the proposed project would amount to a holding company/Wholly owned Subsidiary/a company with dominant foreign investment (i.e. 75% or more) Joint venture.
d) Whether the proposed foreign equity is for setting up a new project (Joint Venture or otherwise) or whether it is for enlargement of foreign /NRI equity or whether it is for fresh induction of foreign equity/NRI equity in an existing Indian company.
e) In the case of fresh induction of foreign/NRI equity and/or cases of enlargement of foreign/NRI equity in existing Indian companies whether there is a resolution of Board of Directors supporting the said induction/enlargement of foreign/NRI equity and whether there is a shareholders agreement or not.
f) In the case of induction of fresh equity in the existing Indian companies and/or enlargement of foreign equity in existing Indian companies, the reason why the proposal has been made and the modality for induction/enhancement [i.e. whether by increase of paid up capital/authorized capital, transfer of shares (hostile or otherwise) whether by right issue, or by what modality].
Cases pertaining to FIPB approvals, which involve increase in the non-resident equity within the approved percentage of non-resident equity in a joint venture company and enhancement of paid up capital in a wholly owned subsidiary do not require FIPB approval provided the intent for increase in the amount of foreign equity is duly notified to SIA and formal documentation by way of intimation is made to SIA within 30, days of receipt of funds and allotment of shares (to non-resident shareholders).
g) Issues/transfer/pricing of shares will be as per SEBI/RBI guidelines.
h) Whether the activity is an industrial or a service activity or a combination of both.
i) Whether the item of activity involves any restrictions by way of the small scale sector..
j) Whether there are any sectoral restrictions on the activity (e.g. there is ban on foreign investment in real estate while it is not for NRI investment).
k) Whether the item involves only trading activity and if so whether it involves export or both export and import, or also includes domestic trading and if domestic trading whether it also includes retail trading.
l) Whether the proposal involves import of items, which are hazardous, banned or detrimental to environment (e.g. import of plastic scrap or recycled plastics).
9. In respect of activities to which equity caps apply, FIPB may consider recommending higher levels of foreign equity as compared to the prescribed caps, keeping in view the special requirements and merits of each case .
10. In respect of other Industries/activities the Board may consider recommending 51% Foreign Equity on examination of each individual proposal. For higher levels of equity up to 74% the Board may consider such proposals keeping in view considerations such as the extent of capital needed for projects, the nature and quality of technology, the requirements of marketing and management skills and the commitment for exports.
11. FIPB may consider recommending proposals for 100% Foreign owned holding/subsidiary companies based on the following criteria:
a) Where only "holding" operations is involved all subsequent/down stream investments to be carried out would require prior approval of the Government;
b) Where proprietary technology is sought to be protected or sophisticated technology is proposed to be brought in;
c) Where at least 50% of production is to be exported;
d) Proposals for consultancy; and
e) Proposals for industrial model towns/industrial parks or estates.
12. In special cases, where the foreign investor is unable initially to identify an Indian joint venture partner the Board may consider and recommend proposals permitting 100% foreign equity on a temporary basis on the condition that the foreign investor would divest to Indian parties (either individual joint venture partners or general public or both) at least 26% of its equity with in a period of 3-5 years.
13. Similarly in the case of a joint venture, where the Indian partner is unable to raise resources for expansion/technological up-gradation of the existing industrial activity the Board may consider and recommend increase in the proportion/percentage (up to one hundred percent) of foreign equity in the enterprise.
14. In respect of trading companies 100% foreign equity may be permitted in the case of activities involving the following:
a) exports;
b) bulk imports with ex-ports/ex-bonded warehouse sales;
c) sales of goods and services among the companies of the same group.cash and carry wholesale trading;
d) other import of goods and services provided at least 75% is for procurement and
15. In respect of companies in the infrastructure/services sector where there is a prescribed cap for foreign investment, only the direct investment should be considered for the prescribed cap and foreign investment in an investing company should not be set off against this cap provided the foreign direct investment in such investing company does not exceed 49% and the management of the investing company is with the Indian owners.
16. No condition specific to letter if approval issued to a foreign investor would be changed or additional condition imposed subsequent to issue of a letter of approval. This would not prohibit changes in general policies and regulations applicable to industrial sector.
17. Where in case of a proposal (not being a 100% subsidiary) foreign direct investment has been approve up to a designated percentage of foreign equity in the joint venture company the percentage would not be reduced while permitting induction of additional capital subsequently. Also in case of approved activities if the foreign investor (s) concerned wished to bring in additional capital on later dates keeping the investment to such approved activities, FIPB would recommend such cases for approval on an automatic basis.
18. As regards proposals for private sector banks, the application would be considered only after "in principle" permission is obtained from the Reserve Bank of India (RBI).
19. The restrictions prescribed for proposals in various sectors as obtained should be kept in view while considering the proposals.
SECTOR SPECIFIC GUIDELINES FOR FOREIGN DIRECT INVESTMENT
|
S. No. |
Sector/
Activity |
FDI Cap/
Equity |
Entry Route |
Other conditions |
Relevant Press Note
issued by
DIPP |
|
1 |
Airports |
|
|
|
|
|
a. |
Greenfield
projects
|
100%
|
Automatic
|
Subject to sectoral
Regulations notified by
Ministry of Civil Aviation
www.civilaviation.nic.in
|
PN 4/2006 |
|
b. |
Existing
projects
|
100%
|
FIPB
Beyond
74%.
|
ubject to sectoral regulations
notified by Ministry of
Civil Aviation
www.civilaviation.nic.in
|
PN 4/2006 |
|
2. |
Air
Transport
Services
|
49%- FDI;
100%- for
NRI
Investment
|
Automatic
|
Subject to no direct or indirect
participation by foreign airlines.
Government of India Gazette
Notification dated 2.11.2004
issued by Ministry of Civil Aviation
www.civilaviation.nic.in
|
PN 4/2006
|
|
3. |
Alcohol
Distillation
& Brewing
|
100%
|
Automatic
|
Subject to license by
appropriate authority
|
PN 4 / 2006 |
|
4. |
Asset
Reconstru
ction
Companies
|
49% (onl
FDI)
|
FIPB
|
Where any individual
investment exceeds 10% of the
equity, provisions of Section 3(3)(f)
of Securitization and Enforcement
of Security Interest Act, 2002 should
be complied with. www.finmin.nic.in
|
|
|
5. |
Atomic
Minerals
|
74%
|
FIPB
|
Subject to guidelines
Subject to guidelines issued
by Department of Atomic
Energy vide Resolution
No. 8/1 (1)/97-PSU/1422
dated 6.10.98.
|
|
|
6. |
Banking -
Private
sector
|
74%
(FDI+FII)
|
Automatic
|
Subject to guidelines for
setting up branches/
subsidiaries of foreign
banks issued by RBI.
|
PN 2/2004
|
|
7. |
Broadcasting |
|
|
|
|
|
a. |
FM Radio
|
FDI+FII
investments
up to 20%
|
FIPB
|
Subject to guidelines
notified by Ministry of
Information & Broadcasting.
|
PN 6/2005 |
|
b. |
Cable
network
|
49%
(FDI+FII)
|
FIPB
|
Subject to Cable Television
Network Rules (1994)
Notified by Ministry of
Information & Broadcasting.
|
|
|
c. |
Direct To
Home
|
49%
(FDI+FII).
(within this limit,
FDI component not
to exceed 20%)
|
FIPB
|
Subject to guidelines issued
by Ministry of Information &
Broadcasting.
|
|
|
d. |
Setting up
hardware
facilities
such as
up-linking,
HUB, etc
|
49%
(FDI+FII)
|
FIPB
|
Subject to Up-linking Policy
notified by Ministry of
Information & Broadcasting
|
PN 1/2006 |
|
e. |
Up-linking
a News &
|
26%
FDI+FII
|
FIPB
|
Subject to guidelines
issued by Ministry of
|
PN 1/2006 |
|
f. |
Up-linking a
Non-News
& Current
Affairs TV
Channel
|
100%
|
FIPB
|
Subject to guidelines issued
by Ministry of Information &
Broadcasting
|
- PN 1/2006
|
|
8. |
Cigars& Cigarettes Manufacture |
100% |
FIPB |
Subject to industrial license
Cigarettesunder the Industries
Manufacture (Development & Regulation)
Act, 1951
|
PN 4/2006
|
|
9. |
Coal &
Lignite
mining for
captive
consumption
by power
projects,
and iron &
steel, cement
production
and other
eligible
activities
permitted
under the
Coal Mines
(Nationaliza-
tion)
Act, 1973.
|
100%
|
Automatic
|
Subject to provisions of Coal
Mines (Nationalization)
Act,1973
|
PN 4/2006 |
|
10. |
Coffee &
Rubber
processing &
warehousing
|
100%
|
Automatic
|
|
PN 4/2006
|
|
11. |
Construction
Development
projects,
including housing,
commercial
premises,
resorts,
educationa
institutio
recreation
facilities
and region
level
infrastruc
townships.
|
100%
|
Automatic
|
Subject to conditions
conditions notified vide
Press Note 2 (2005 Series)
including:
a. minimum capitalization of
US$ 10 million for wholly
owned subsidiaries and
US$ 5 million for Joint
venture. The Funds would
have to be brought within
six months of commencement
of business of the Company.
b. Minimum area to be
developed under each
project 10 hectares in case
of development of serviced hous
plots; and built-up area of 50,
mts. in case of construction
development project; and any of
above in case of a combination
project.
[Note:For investment by NRIs,
the conditions mentioned in
Press Note 2 I 2005 are not
applicable.]
|
PN 2 / 2005
& PN 2/2006 |
|
12. |
Courier
services fo
carrying
packages,
parcels and
other items
which do no
come within
the ambit o
the Indian
Post Office
Act, 1898.
|
100%
|
FIPB
|
Subject to existing laws
and exclusion of activity
relating to distribution of
letters, which is exclusively
reserved for the State.
www.indiapost.gov.in
|
PN 4/2001
|
|
13.
|
Defence
production
|
26%
|
FIPB
|
Subject to licensing under
Industries (Development &
Regulation) Act, 1951 and
guidelines on FDI in
production of arms &
ammunition.
|
PN 4/2001
& PN 2/2002
|
|
14. |
Floriculture,
Horticulture,
Development
of Seeds, Animal
Husbandry;
Pisciculture,
aqua-culture,
cultivation of
vegetables,
mushrooms,
under controlled
conditions
and services
related to agro
and allied sectors.
|
100%
|
Automatic
|
|
PN 4/2006 |
| 15. |
Hazardous
Chemicals,
viz., hydrocyanic
acid and its
derivatives;
phosgene and its
derivatives; and
isocyanates and
diisocyantes of
hydrocarbon.
|
100%
|
Automatic
|
Subject to industrial license
under the Industries
(Development & Regulation)
Act, 1951 and other sectoral
regulations.
|
PN 4/2006
|
16.
|
Industrial
explosives
Manufacture
|
100%
|
Automatic
|
Subject to industrial license
under Industries
(Development & Regulation)
Act, 1951 and regulations
under Explosives Act, 1898
|
PN 4/2006
|
| 17. |
Insurance
|
26%
|
Automatic
|
Subject to licensing by the
Insurance Regulatory &
Development Authority
www.irda.nic.in.
|
PN 10/2000
|
18.
|
Investing
companies in
infrastructure/
services sector
(except telecom
sector)
|
49%
|
FIPB
|
Foreign investment in an
investing company will not
be counted towards sectoral
cap in infrastructure/services
sector provided the
investment is up to 49% and
the management of the
company is in Indian hands.
|
PN 2/2000
& PN 5/2005
|
19.
|
Mining covering
exploration and
mining of
diamonds &
precious stones;
gold, silver and
minerals.
|
100%
|
Automatic
|
Subject to Mines & Minerals
(Development & Regulation)
Act, 1957 www.mines.nlc.in
Press Note 18 (1998) and
Press Note 1 (2005) are not
applicable for setting up
100% owned subsidiaries in
so far as the mining sector is
concerned, subject to a
declaration from the applicant
that he has no existing joint
venture for the same area
and/or the particular mineral.
|
PN 2/2000
PN 3/2005,
& PN 4/2006
|
20.
i
ii
iii
iv
v
vii
viii
ix
x
xi
xii
xiii
xiv
xv
xvi
xvii
xviii
xix
|
Non Banking Finance Companies-approved activities
Merchant
banking
6/2000, &
Underwriting
Portfolio
Management
Services
Investment
Advisory
Services
Financial
Consultancy
Stock
Broking
Asset
Management
Venture
Capital
Custodial
Services
Factoring
Credit
Reference
Agencies
Credit
Rating
Agencies
Leasing
& Finance
Housing
Finance
Forex
Broking
Credit
Card
Business
Money
changing
Business
Micro credit
Rural credit.
|
100%
|
Automatic
|
Subject to:
a.minimum capitalization norms for fund based
NBFCs - US$ 0.5
Million to be brought
upfront for FDI up to 51%;
US$ 5 million to be brought
upfront for FDI above 51%
and up to 75%; and US$
50 million out of which US$
7.5 Million to be brought
upfront and the balance in
24 Months for FDI Beyond
75% and up To 100%.
b. minimum capitalization
norms for non-fund based
NBFC activities- US$ 0.5
million.
c. foreign investors can set
up 100% operating
subsidiaries without the
condition to disinvest a
minimum of 25% of its
equity to Indian entities
subject to bringing in US$
50 million without any
restriction on number of
operating subsidiaries
without bringing additional
capital.
d. joint venture operating
NBFC's that have 75% or
less than 75% foreign
investment will also be
allowed to set up
subsidiaries for
undertaking other NBFC
activities subject to
the subsidiaries also
complying with the
applicable minimum
capital inflow.
e. compliance with the
guidelines of the RBI. |
PN 2/2000,
PN
PN 2/2001
|
21.
a.
b.
|
Petroleum & Natural Gas sector
Other than
4/2006
Refining
|
100%
Refining and
including market
study and
formulation;
investment
financing; setti
up infrastructur
for marketing in
Petroleum &
Natural Gas sect
26% in case
of PSUs
100% case
of Private
companies
|
Automatic
FIPB
(in case of
PSUs)
Automatic
(in case of
private
companies)
|
Automatic Subject to sectoral
and regulations issued by
g market Ministry of Petroleum &
d Natural Gas; andin the
ion; case of actual trading
nt and marketing of petroleum
g; setting products, divestment of 26%
structure equity in favour of Indian
eting in partner/public within 5 years.
m &
Gas sector.
ase FIPB Subject to Sectoral policy
|
PN 1/2004
& PN
PN 2/2000
|
22.
a.
b.
|
Print Media
Publishing of
newspaper and
periodicals
dealing with news
and current affairs
Publishing of
scientific
magazines/
specialty/
journals/
periodicals
|
26%
100%
|
FIPB
FIPB
|
Subject to Guidelines notified
by Ministry of Information &
Broadcasting.
Subject to guidelines issued
by Ministry of Information &
Broadcasting.
|
PN 1/2004
|
23.
|
Power including
generation (except
Atomic energy);
transmission,
distribution and
Power Trading.
|
100%
|
Automatic
|
Subject to provisions of the
Electricity Act. 2003
|
PN 2/1998,
PN 7/2000,
& PN4/2006
|
24.
|
Tea Sector.
including tea
plantation
|
100%
|
FIPB
|
Subject to divestment of 26%
equity in favour of Indian
partner/Indian public within 5
years and prior approval of
State Government for change
in land use.
|
PN 6/2002
|
25.
a.
b.
c.
d.
|
Telecommunication
Basic and cellular,
Unified Access
Services, National
International
Long Distance,
V-Sat, Public
Mobile Radio
Trunked Services
(PMRTS), Global
Mobile Personal
Communications
Services (GMPCS)
and other value
added telecom
Services
ISP with gateways,
radio-paging,
endto-end
bandwidth.
ISP Without
Gateway,
Infrastructure
provider providing
dark fibre,
electronic mail
and voice mail
Manufacture
of telecom
equipments
|
74%
(Including
FDI, FlI
NRI,FCCBs,
ADRs, GDRs,
convertible
preference
shares,
and proportio-
nate foreign
equity in
Indian
promoters/
Investing
Company)
74%
100%
49%
100%
|
Automatic
Up to 49%
FIPB
Beyond
49%
Automatic
up to 49%
FIPB
Beyond
49%
Automatic
up to 49%
FIPB
Beyond
Automatic
|
Subject to guidelines notified
in the PN 5 (2005 Series).
Subject to licensing and
security requirements
notified by the Department of
Telecommunications
www.dotindia.com
Subject to the condition that
such Companies shall divest
26% of their equity in favour
of Indian Public in 5 years, if
these companies are listed in
other parts of the world. Also
subject to licensing and
security requirements,
where required.
Subject to sectoral
requirements. |
PN 5/2005
PN 4/2001
PN 9/2000
PN 2/2000
|
26.
a.
b.
c.
d.
e.
|
Trading
Wholesale/cash
& carry trading
Trading for
exports
Trading of items
sourced from
small scale
sector
Test marketing
of such Items for which a
company Has
approval for
manufacture
Single Brand
Product retailing
|
100%
100%
100%
100%
51%
|
Automatic
Automatic
FIPB
FIPB
FIPB
|
Subject to guidelines for FDI
in trading issued by
Department of Industrial
Policy & Promotion vide
Press Note 3 (2006 Series).
|
PN 4/2006
|
27.
|
Satellites
Establishment
and operation
|
74%
|
FIPB
|
Subject To Sectoral
guidelines issued by
Department of Space/ISRO
www.isro.org
|
|
28.
|
Special Economic
Zones and Free
Trade
Warehousing
Zones Covering
setting up of
these Zones and
setting up units
in the Zones
|
100%
|
Automatic
|
Subject To Special Economic
Zones Act,2005 and the
Foreign Trade Policy.
www.sezindia.nic.in
|
PN 9/2000,
PN 2/2006,
&PN4/2006
|
|
