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Review of Foreign Direct Investment (FDI) policy on various sectors

FEMA - Press Note No. 12 (2015 Series) - Dated:- 24-11-2015 - Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC-I Section) Press Note No. 12 (2015 Series) Subject : The Government of India has reviewed the extant FDI policy on various sectors and made following amendments in the Consolidated FDI Policy Circular of 2015 (FDI Policy), effective from May 12, 2015, and as amended from time to time. 2. After para 2.1.25 of the FDI Policy, foll .....

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6.2.5 of the FDI Policy is amended to read as under: 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 Government approval. 3. Para 3.2.5 of the FDI Policy is amended to read as under: FDI in LLPs is permitted, subject to the following conditions: (a) FDI is permitted under the a .....

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ra 2.1.7 of the FDI Policy is amended to read as under: 'Control'shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. For the purposes of Limited Liability Partnership, control' will mean right to appoint majority of the designated partners, where such designated partners, with specific exclusion to others, have con .....

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ontributed by resident Indian citizens and/or entities which are ultimately owned and controlled by resident Indian citizens' and such resident Indian citizens and entities have majority of the profit share. 6. Para 3.10.4.2 of the FDI Policy is amended to read as under: Downstream investments by Indian companies/LLPs will be subject to the following conditions: (i) Such a company/LLP is to notify SIA, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.c .....

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) For the purpose of downstream investment, the Indian companies/LLPs making the downstream investments 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 operations, from raising debt in the domestic market. Downstream investments through internal accruals are permissible, subject to the provisions of paragraphs 3.10.3 and 3.10.4.1. For the purposes of FDI policy, internal accruals .....

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or infusion of foreign investment for undertaking activities which are under Government route, regardless of the amount or extent of foreign investment. 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. 8. Para 3.5.6 of the FDI Policy is amended to read as under: In cases of investment by way of swap of shares, irrespective of the amount, valuation of th .....

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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. 10. Para 3.6.2 of the FDI Policy is amended to read as under Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens to non-resident entities, in sectors under government approval route Foreign investment in se .....

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ens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. or (iv) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transf .....

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A (Transfer or Issue of Security by Persons Resident Outside India) Regulations. (vi) Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents. (vii) A company, trust and partnership firm incorporated outside India and owned and controlled by non-resident Indians will be eligible for investments under Schedule 4 of FEMA (Transfer or issue of Secur .....

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crore would be placed for consideration of Cabinet Committee on Economic Affairs (CCEA). 5.2.3 The CCEA would also consider the proposals which may be referred to it by the FIPB/the Minister of Finance (in-charge of FIPB). 12. Para 6.2.1.1 of the FDI Policy is amended to read as under: The term "under controlled conditions" covers the following: (i) Cultivation under controlled conditions' for the categories of floriculture, horticulture, cultivation of vegetables and mushrooms is .....

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arming systems with stall-feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems as prescribed by the National Livestock Policy, 2013 and in conformity with the existing 'Standard Operating Practices and Minimum Standard Protocol.' (b) Poultry breeding farms and hatcheries where micro-climate is controlled through advanced tech .....

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spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons. 13. Para 6.2.2 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investment Cap Entry Route (i) Tea sector including tea plantations (ii) Coffee plantations (iii) Rubber plantations (iv) Cardamom plantations (v) Palm oil tree plantations (vi) Olive oil tree plantations Note: Besides the above, FDI is not allowed in any other plantation sector/activity 100% Autom .....

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ons framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987. (ii) FDI will not be allowed in mining of "prescribed substances" listed in the Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of Atomic Energy. Clarification: (1)For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium spong .....

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ribed at (i) (A) above shall be deemed to be fulfilled. 15. Para 6.2.6 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investment Cap Entry Route 6.2.6.1 Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951 49% Automatic up to 49% Above 49% under Government route on case to case basis, wherever it is likely to result in access to modern and 'state-of- art' technology in the country. 6.2.6.2 Other Conditions (i .....

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airs. (iii) Foreign investment in the sector is subject to security clearance and guidelines of the M/o Defence. (iv) 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. 16. Para 6.2.7.1 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investment Cap .....

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and addressability and Local Cable Operators (LCOs)) 100% Automatic up to 49% Government route beyond 49% Para 6.2.7.2 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investment Cap Entry Route 6.2.7.2.1 49% Government Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from time to time, by Ministry of Information & Broadcasting, for grant of permission for setting up of FM Radio stations 6.2.7.2.2 Up-linking of 'News & .....

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resident Indian citizens. (A)For this purpose, the equity held by the largest Indian shareholder would have to be at least 51 % of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956 or Section 2 (72) of the Companies Act, 2013, as the case may be. The term largest Indian shareholder', used in this clause, will include any or a combination of the following: (I) In the case of an individual .....

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ny which must have a resident Indian or a relative as defined under Section 2 (77) of Companies Act, 2013/ HUF, either singly or in combination holding at least 51% of the shares. (C)Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (I) and (II) of clause 4.1.3(v)(d)(A) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company. 17. Para 6.2.9.3 of the FDI Pol .....

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amended to read as under: Sector/Activity Foreign Investment Cap Entry Route (1)Ground Handling Services subject to sectoral regulations and security clearance 100% Automatic (2)Maintenance and Repair organizations; flying training institutes; and technical training institutions. 100% Automatic 19. Para 6.2.13 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investment Cap Entry Route 6.2.13.1 Satellites- establishment and operation, subject to the sectoral guidelines of D .....

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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) Flls/FPIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding. 21. Para 6.2.11 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investment Cap Entry Route 6.2.11.1 Construction-development projects (which would include develo .....

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after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage. (ii) Notwithstanding anything contained at (A) (i) above, a foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed. Further, transfer of stake from one non-resident to another non- re .....

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plots. For the purposes of this policy "developed plots" will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available. (D) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with .....

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ent rights (TDRs). "Real estate business" means dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent/ income on lease of the property, not amounting to transfer, will not amount to real estate business. (ii) Condition of l .....

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to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period. (v) "Transfer", in relation to FDI policy on the sector, includes,- (a) the sale, exchange or relinquishment of the asset ; or (b) the extinguishment of any ri .....

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g the enjoyment of, any immovable property. 22. Para 6.2.16.1.2 (f) of the FDI Policy is amended to read as under: A wholesale/cash & carry trader can undertake single brand retail trading, subject to the conditions mentioned in para 6.2.16.3. An entity undertaking wholesale/cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions of the FDI policy for wholesale/ .....

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sumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (2) FDI in Single Brand product retail trading would be subject to the following conditions: (a) Products to be sold should be of a 'Single Brand' only. (b) 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 Indi .....

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with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/franchise/sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and SIA/FIPB for cases involving approval. (e) In respect of proposals involving FDI beyond 51 %, sourcing of 30% of the .....

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scertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of Foreign Investment for the purpose of carrying out single-brand product retail trading. (f) Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce. (3) Application seeking permission of the Government for FDI exceeding 49% in a company .....

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roducts/product categories proposed to be sold except food products would be provided to the RBI. (4) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval. Note: (i) Conditions mentioned at Para 6.2.16.3 (2) (b) & 6.2.16.3 (2) (d) will not be applicable for undertaking SBRT of Indian brands. (ii) An Indian manufacturer .....

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Indian citizens. (v) Government may relax sourcing norms for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible. 24. After para 6.2.16.4 of the FDI Policy, following new para is added: Sector/Activity Foreign Investment Cap Entry Route 6.2.16.5 Duty Free Shops 100% Automatic (i) Duty Free Shops would mean shops set up in custom bonded area at International Airports/Internationa .....

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through stock exchanges for FIIs/FPIs and NRIs will be as follows: (i) In the case of FIIs/FPIs, as hitherto, individual FII/FPI holding is restricted to below 10 per cent of the total paid-up capital, aggregate limit for all Flls/FPIs/QFIs cannot exceed 24 per cent of the total paid-up capital, which can be raised up to sectoral limit of 74 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect b .....

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