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The updated information on the current FDI Policy in India is available on Department of Industrial Policy & Promotion (DIPP) website (http://dipp.nic.in), look for links like ‘Consolidated FDI Policy Circular 20XX’
The changes and clarifications in FDI policies during the financial year are brought out in the form of Press Notes by Department of Industrial Policy & Promotion (DIPP). The changes in the FDI policy are incorporated in Consolidated FDI Policy Circular released in the month of April each year, and are meant for the current financial year (Financial Year is April-March). At the time of writing this response, the current updated FDI policy document is available as ‘Consolidated FDI Policy Circular 2015’.
There are a number of incentives provided by the central government and respective state governments, a sampling of a few follow:
Central Government Incentives:
- Incentives available to unit’s set-up in SEZ, NIMZ etc. and EOUs.
- Exports incentives like duty drawback, duty exemption/remission schemes, focus products & market schemes etc.
- Areas based incentives like unit set-up in North East region, Jammu & Kashmir, Himachal Pradesh, and Uttarakhand.
- Sector specific incentives like Modified special incentive package scheme (M-SIPS) in electronics.
- Central government maintains ‘Country desk’ for PRC investors to help facilitate FDI participants at a country level.
State Government Incentives:
- Each state government has its own incentive policy, which offers various types of incentives based on the amount of investments, project location, employment generation, etc. The incentives differ from state to state and are generally laid down in each state’s industrial policy.
- The broad categories of state incentives include: stamp duty exemption for land acquisition, refund or exemption of value added tax, exemption from payment of electricity duty etc.
- State governments also provide assistance through their foreign investment promotion bureaus
For more details please refer to:
Foreign Direct Investment in an Indian company is considered under two routes:
- Automatic Approval - by the country's Central Bank, the Reserve Bank of India (RBI), Mumbai or
- Through the Foreign Investment Promotion Board (FIPB),
- FIPB approval is required for the proposals not eligible for Automatic Approval.
Applications have to be submitted in Form IL-FC or on plain paper with full details to the Secretariat for Industrial Assistance (SIA) for the cases involving NRI/OCB investment and 100% EOU. For remaining cases, the applications may be submitted to Department of Economic Affairs, Ministry of Finance. The proposals are considered by the FIPB in the Department of Economic Affairs. IL-FC Form is available at Website in a downloadable format on the DIPP Website (http://dipp.nic.in).
The sectors requiring Central Government’s Approval are:
Mining and mineral separation of titanium-bearing minerals and ores, its value addition and integrated activities -100%.
FDI in enterprise manufacturing items reserved for small scale sector – 100%.
Defence – beyond 49% under FIPB approval (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).
Teleports (setting up of up-linking HUBs/Teleports), Direct to Home (DTH), Cable Networks (Multi-system operators operating at National or State or District level and undertaking upgradation of networks towards digitalisation and addressability), Mobile TV and Headend-in-the Sky Broadcasting Service(HITS) – beyond 49%.
Broadcasting Content Services: Terrestrial Broadcasting FM (FM Radio), Up-linking of ‘News & Current Affairs’ TV Channels – 49%
Publishing/printing of scientific and technical magazines/specialty journals/periodicals – 100%.
Print media: publishing of newspaper and periodicals dealing with news and current affairs- 26%, Publication of Indian editions of foreign magazines dealing with news and current affairs- 26%.
Publication of facsimile edition of foreign newspaper – 100%.
Airports – brownfield – beyond 74%.
Satellites – establishment and operation - 100%.
Private securities agencies – 49%.
Single Brand Retail Trading– beyond 49%.
(Except Opening of Duty Free Shops in the Customs bonded areas)
Asset reconstruction company – beyond 49% and up to 100%.
Private Banking Sector – 74%.
Insurance - beyond 26% and up to 49%.
Pension Sector - beyond 26% and up to 49%.
Pharmaceuticals – brownfield – 100%.
- Automatic Approval through Reserve Bank of India is available for all items/activities except a few as enlisted above under FIPB route.
No prior approval is required. The company is only required to report to RBI within 30 days of receipt of foreign equity/allotment of shares.
4. Can a Foreign Company setting up an Export Oriented Unit sell in the local market? Are there any restrictions?
There are four schemes for Export Oriented Units. They are the 100% EOUs, Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Special Economic Zones (SEZ). FDI/NRI/OCB investment up to 100% in these units is eligible for automatic route subject to fulfilling parameters prescribed in Press Note No.2 (2000 series) dated 11.2.2000. This Press Note is available on the website http://dipp.nic.in
Entire production of EOU/EHTP/STP/BTP units shall be exported subject to following:
- Export Oriented Units (EOUs) (other than gem and jewellery units), could sell goods and services up to 50% of FOB value of exports. The sales are subject to fulfilment of positive Net Foreign Exchange (NFE) earnings.
- Gems and Jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA, subject to fulfilment of positive NFE.
- To balance the lower customs duty benefit availed by EOU’s, when selling in the DTA, “an amount equal to Anti-Dumping duty under section 9A of the Customs Tariff Act, 1975 leviable at the time of import, shall be payable on the goods used for the purpose of manufacture or processing of the goods cleared into DTA from the unit.”
- Sales are allowed only of similar goods manufactured and exported.
- No domestic sales at concessional duty is allowed for motor cars, alcoholic liquors, tea (except instant tea) and books or by a packaging/ labelling/ segregation/ refrigeration unit/ compacting/ micronisation/ pulverization/ granulation/ conversion of mono-hydrate form of chemical to anhydrous form or vice-versa.
- Sale of rejects up to 5% of FOB value of exports are not subject to achievement of NFE.
For further details and updates refer to:
All foreign investments are freely repatriable (net of applicable taxes) except in cases where:
- the foreign investment is in a sector like Construction and Development Projects and Defence wherein the foreign investment is subject to a lock-in-period; and
Further, dividends (net of applicable taxes) declared on foreign investments can be remitted freely through an Authorised Dealer bank. The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time. (https://www.rbi.org.in/scripts/Fema.aspx )
For further details and updates refer:
‘Consolidated FDI Policy Circular 2015’ on DIPP website (http://dipp.nic.in)