FOREIGN INVESTMENT - POLICIES AND PROCEDURES

In a bid to reduce the country's huge oil import bill, the Government gave its nod to National Policy on Biofuels besides giving approval for setting up of National Bio-fuel Coordination Committee and Bio-Fuel Steering Committee. Under the approved policy, the country aims to raise blending of biofuels with petrol and diesel to 20% by 2017.

• For Credit Information Companies,foreign investment, i.e. FDI+FII,is allowed up to 49%, with prior approval of the Government and regulatory clearance from RBI. FII investment has been permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. Such FII investment has been permitted subject to the conditions that:(a) No single entity is to directly or indirectly hold more than 10% equity; (b) Any acquisition in excess of 1 % is to be reported to RBI as a reporting requirement; and (c) FIIs investing in CICs are not to seek a representation on the Board of Directors based upon their shareholding.
  
  
• Keeping in view the policy on foreign investment in infrastructure companies in the securities markets and the special characteristics of the commodity futures market, the Government of India has allowed foreign investment in Commodity Exchanges as under:(a)Foreign investment has been allowed through a composite ceiling i.e. FDI + FII, of 49%, with FII investment limited to 23% and FDI limited to 26%;(b) FDI will be allowed with prior approval of the Government;(c) FII purchases are to be restricted to the secondary market only; and (d) No single entity is to hold more than 5% of the equity in these companies.
  
  
• Government has allowed the following qualifying conditions for FDI up to 100% under the automatic route, both in setting up and in established industrial parks:(i) 'industrial park' is a project in which quality infrastructure facilities in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity;(ii) Industrial activity permitted in the area designated as an 'industrial park' would be Manufacturing, Electricity, gas and water supply, Post and telecommunications, Software publishing, consultancy and supply, Data processing, Database activities and distribution of electronic content, other computer related activities, Research and experimental development on natural sciences and engineering, Business and management consultancy activities and Architectural, engineering and other technical activities;(iii) The Industrial Park would, in addition, have the following features;(a) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area;(b) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area.
  
  

• Government has allowed foreign investment in civil aviation as follows:(a) No foreign airlines would be allowed to participate directly or indirectly in the equity of an Air Service Undertaking engaged in operating scheduled, non-scheduled and Chartered Airlines. They would be allowed to participate in the equity of companies operating cargo airlines, helicopter and seaplane services;(b) FDI up to 49% and investment by Non-resident Indians (NRIs) up to 100% has been allowed on the automatic route in the Domestic Scheduled Passenger Airline Sector;(c) FDI up to 74% and investment by Non-resident Indians (NRIs) up to 100% has been allowed on the automatic route in Non Scheduled airlines, Chartered airlines, and Cargo airlines;(d) FDI up to 74% and investment by NRIs up to 100% has been allowed on the automatic route in Ground Handling Services; and (e) FDI up to 100% has been allowed on the automatic route in Maintenance and Repair organizations, flying training institutes technical training institutions, and helicopter services/seaplane services.

• FDI Policy in Petroleum & Natural Gas sector earlier permitted FDI up to 26% under the FIPB route in case of Public Sector Refining while FDI up to 100% was permitted on the automatic route in Private sector refineries.Government has deleted the condition of compulsory divestment of up to 26% equity within 5 years for actual trading and marketing of petroleum products.Government has allowed FDI up to 49%, with prior approval of FIPB, in petroleum refining by PSUs, without involving any divestment of dilution of domestic equity in the existing PSUs.

• Government has allowed FDI up to 100%, with prior approval of the Government, in Titanium bearing minerals & ores and its value addition, subject to the sectoral regulations and the Mines and Minerals (Development and Regulation) Act, 1957. FDI for separation of titanium bearing minerals & ores will be subject to the following additional conditions:(i) value addition facilities are to be set up within India along with transfer of technology;(ii) disposal of tailings during the mineral separation is to be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board.No FDI is permitted in mining of other atomic minerals.

• Government of India has decided to allow foreign investment in publication of facsimile edition of foreign newspapers and Indian edition of foreign magazines dealing with news and current affairs as under:
  
  
  • Policy for foreign direct investment (FDI) in publication of facsimile edition of foreign newspapers
    
    (1) FDI up to 100% is permitted with prior approval of the Government in publication of facsimile edition of foreign newspapers provided the FDI is by the owner of the original foreign newspaper(s) whose facsimile edition is proposed to be brought out in India.
    

    (2) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956.

(3) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time.

• Policy for foreign investment in publication of Indian editions of foreign magazines dealing with news and current affairs
  
  

(1) Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26%, is permitted with prior approval of the Government.

(2) ‘Magazine’, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news.

(3) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008.

• The Government is all set to accept the recommendations of a ministerial group and ban foreign direct investment (FDI) in tobacco.The move forms part of a Cabinet note prepared by the Department of Industrial Policy and Promotion (DIPP) that frames the country’s foreign investment rules.The DIPP has prepared the note containing the inter-ministerial group’s decision for the Cabinet Committee on Economic Affairs (CCEA), the Government’s highest decision-making body on economic issues, a senior Government official said. At present,Government does not allow creation of fresh cigarette manufacture capacity.
  
  
• The Government is once again pushing for foreign investment in the retail sector, albeit in a calibrated manner. In a new strategy being drawn up by the DIPP, foreign direct investment in single brand retail could be hiked to 74% from 51% now. The Government earlier tried to increase the FDI in single brand retail to 100% but couldn’t. As an alternative, it had tried to bring in 51% FDI in multi-brand speciality retail segments like sports goods and stationery, but that too didn’t get off the ground. If the current move succeeds, it would benefit international brands like Marks & Spencer, Nike, Adidas, Benetton, which have set shop in the country through joint ventures and franchisees. “With 26% (with Indian partners), the Indian partners would still have special powers, and all control would not pass into the hands of the foreign player, so we do not expect much resistance from any corner,” the official said.
  
  
• The Government has allowed 100-percent FDI in the renewable energy sector and a conducive policy has been put in place to attract foreign companies,Minister for New and Renewable Energy Farooq Abdullah said.“(Policy) structures have been put in place to facilitate power trading and open access,” the Minister said. The Government has approved a generation-based incentive scheme in wind power projects for foreign investors who cannot avail the benefits of accelerated depreciation available to domestic investors. Abdullah said over two million solar energy-run appliances had been distributed or installed across the country under the solar energy program.

The Department of Industrial Policy and Promotion is the nodal agency for information and assistance to foreign investors. Their website www.dipp.nic.in has comprehensive information for foreign investors and gives weekly updates on proposals for foreign investment under consideration. It also gives information on projects available for foreign investors and contains online applications for clearances.