Recent Amendment of FDI Policy

Recent Amendment of FDI Policy


Sep 26


Posted by: CS Shilpi Thapar

The Department of Industrial Policy and Promotion, Ministry of Commerce & Industry, Government of India notified the cabinet decisions on FDI in single brand retail, multi brand retail, civil aviation, broadcasting sector and power exchanges by issuing Press Notes No. 4, 5, 6, 7,8 dated 20th September,2012.

1.FDI in Single Brand Product Retail Trading Policy Changes(Press note no. 4(2012):

FDI up to 100 percent is permitted in Single Brand Product Retail Trading by only one Non-Resident entity basis, whether owner of the brand or otherwise, under the Government route subject to the following terms and conditions:

• Products to be sold should be of a ‘Single Brand’ only.

• Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

• ‘Single Brand’ product-retail trading would cover only products which are branded during manufacturing.

• Investing non-resident entity may be brand owner or otherwise.

• For FDI proposal beyond 51%, “at least 30% in value sourcing from small industries/village and cottage industries, artisans and craftsman” modified to “at least 30% in value sourcing from MSMEs, village and cottage industries, artisans and craftsman”. Definition of ‘small industries’ as “industries with total investment not exceeding USD$1.00 million” has been omitted as ‘small industries’ substituted by MSMEs.

• Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of single-brand retail trading.

2. FDI in Multi Brand Product Retail Trading Policy Changes (Press note no. 5(2012):

FDI in Multi brand Product Retail Trading was not permitted. The FDI Policy was reviewed and now it has been decide to permit FDI upto 51 per cent in Multi- Brand Retail Trading under Government Route, subject to the following terms and conditions :

• FDI in multi-brand retail trading permitted in all products under Govt. Approval Route.

• Fresh agricultural products, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery & meat products may be unbranded.

• Minimum FDI to be brought in by foreign investor-US$100 million.

• At least 50% of total FDI brought in to be invested in ‘backend infrastructure’ within 3 years of first tranche of FDI.

• At least 30% in value of procurement to be from ‘small industries’ whose total investment in plant & machinery not exceeding US$1 million.

• No Retail trading by e-commerce by companies with FDI engaged in multi-brand retail trading.

•  Govt. has first right to procurement of agricultural products.

3. Foreign Airlines permitted FDI to invest upto 49% of the Equity Paid Capital of Indian Companies in Civil Aviation Sector under Government Approval Route( PRESS NOTE NO.6 (2012)]

Foreign airlines were allowed to invest only in equity of Indian companies operating cargo airlines, helicopters & seaplanes upto 100% in FDI route. Now foreign airlines allowed to invest in Indian airlines companies operating Scheduled and Non-Scheduled air transport services (even airlines involved in passenger airlines business) other than Air India Ltd. upto 49% limit which will subsume FDI & FII investment.

• Investment by Foreign Airlines through Government Approval Route.

• The Investments so made would need to comply with the relevant regulations of SEBI, such as Issue of Capital and Disclosure Requirements (ICDR) Regulations/Substantial Acquisition of Shares and Takeovers(SAST) Regulations, as well as other applicable rules and regulations.

• The Policy mentioned above is not applicable to M/s.Air India Limited.

4. Automatic Approval Route for Foreign Investment in Companies Operating in the Information & Broadcasting (I&B) Sector (Press Note No.7(2012 Series).

• Foreign Investments in DTH, Cable Networks, Teleports allowed under Government Approval route :

a. Foreign investment up to 49% being permitted under the Automatic Route; and

b. Foreign investment beyond 49% and up to 74% being permitted under the Government Approval Route.

• Mobile TV: FDI up to 74% has been permitted, subject to the condition(s):

a. Foreign investment up to 49% being permitted under the automatic route; and

b. Foreign investment beyond 49% and up to 74% being permitted under the Government Approval Route.

The FDI limit, in companies engaged in the afore stated activities of the I&B sector, shall include, in addition to FDI, investment by Foreign Institutional Investors (FIls), Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities. The terms and conditions relating to security and other conditions, will separately be incorporated in the sectoral guidelines of each broadcasting carriage service.

5. FDI up to 49% permitted in Power Exchanges(Press Note No.8(2012 Series).

As per existing Policy , FDI up to 100%, under the automatic route, is permitted in the power sector (except atomic energy). This includes generation, transmission and distribution of electricity, as well as power trading, subject to the provisions of the Electricity Act, 2003. The Revised Policy permits foreign investment, up to 49%, in Power Exchanges, registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010, as below:

• Such foreign investment would be subject to an FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital;

• FII investments would be permitted under the automatic route and FDI would be permitted under the government approval route;

• FII purchases shall be restricted to secondary market only;

• No non-resident investor/ entity, including persons acting in concert, will hold more than 5% of the equity in these companies; and

• The foreign investment would be in compliance with SEBI Regulations; other applicable laws/ regulations; security and other conditionality.

(Ref: Press notes 4,5,6,7,8 dated 20th September,2012 issued by DIPP, Ministry of Commerce & Industry, Government of India.)

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